The Global Lithium War: Challenges and Opportunities for the United States
Lithium ore falling from a chute onto a stockpile at a production facility.
Lithium in the Green Transition
As the global community turns away from its heavy reliance on fossil fuels, lithium batteries have become a core pillar of the green transition. As the fundamental source of power in electric vehicles (EVs) and energy storage systems, lithium batteries have become a key component of our battery-operated world. Inadequate supply of lithium batteries can often be the limiting factor that caps the production capacity of various consumer, medical, and industrial electronics. Global demand for lithium batteries has skyrocketed in the past few years as EV production and sales have grown due to rising fuel prices and criticism of the environmental impact of traditional gas-powered vehicles. In fact, the demand for lithium batteries in the United States alone is expected to grow sixfold by the end of the decade, translating into a market of $55 billion per year. A study by S&P Global reported that American imports of lithium-ion batteries reached a record 637,396 tons in 2022, marking an 99% increase from 2021, and the third consecutive year in which U.S. battery imports roughly doubled. Given the high demand for lithium that already exists, let’s take a moment to examine how the United States is poised to meet this challenge.
The U.S. imports the majority of its lithium from five countries around the world. (Source: S&P Global)
Global Price and Supply
Following a more than eightfold surge in the price of lithium compounds since the start of 2020, the price has recently steadied near the record $70,000 per tonne in April. To add to the issue, securing access to production is not enough; delivery of output can be a significant challenge as well. Eric Norris, president of lithium at Albemarle, the largest publicly traded lithium producer, stated, “Lithium companies have historically delivered as much as 25 percent less production than promised in a given year because of chronic delays and technical mishaps.” Lithium production is the lengthiest process of any technologies involved in electric batteries. A report by the International Energy Agency (IEA) revealed that lithium mining projects typically take between six and 19 years from an initial feasibility study to actual production. The IEA added that the world needs another 60 lithium mines by 2030 to meet all the decarbonization and electric vehicle plans of national governments, outlining the gap between optimistic policy goals and supply.
Domestic Lithium Reserves and Production Potential
The United States primarily meets its demand for lithium batteries through imports, especially from China, rather than domestic production. Despite having the fourth largest lithium reserves globally and holding an estimated 3.6% of the world’s reserves according to the U.S. Geological Survey, the United States only has one active lithium production mine. The sole large-scale U.S. lithium producer is the Silver Peak Mine in Nevada, operated by the North Carolina-based chemicals company Albemarle. This mine only produces a modest 5,000 tons a year - less than 2 percent of the world’s annual supply. While Albemarle announced plans to double production by 2025 to meet growing demand for EV battery minerals, it’s clear that the U.S. will be reliant on foreign exports to fulfill its lithium needs.
Despite its high lithium reserves, the United States contributes very little to global supply. (Source: Visual Capitalist)
Several new lithium mines in Nevada have sought to establish their footing but have been stymied by environmental lawsuits for years. Other U.S. lithium mines that utilize innovative methods, such as Thatcher Pass and Rhyolite Ridge, appeared to have received the green light to enter the production stages, but were blocked by a slew of controversies and criticisms. Conservation groups claimed that these projects did not minimize their environmental consequences, arguing that they could potentially impact threatened wildlife species, contaminate local groundwater, reduce wildflower population, and violate the National Environmental Policy Act and the Federal Land Policy and Management Act. Although several other U.S. states, such as Maine, California, Oregon, Tennessee, Arkansas, North Dakota, and North Carolina, also have lithium deposits, there is no clear path to production.
Traditional lithium extraction methods aside, the U.S. could mine lithium with low environmental impact through an alternative mining solution that utilizes geothermal methods. The Salton Sea, a lithium-rich lake in California, lies above a geothermal reservoir that is currently used to produce electricity through geothermal power plants. The U.S. can explore a method in which the geothermal steam that is saturated with lithium can be extracted using devices called scrubbers. If successful, this plant could continue to produce renewable geothermal energy, while contributing to the domestic supply of lithium as well.
Aerial view of turquoise colored pools at Silver Peak Lithium Mine, Nevada, California, USA.
Steps Towards Increasing Domestic Production
However, concerned over such heavy reliance on imports to sustain this demand, the Biden administration has made it clear that strengthening American independence in the battery and critical mineral supply chain is a priority. In October 2022, the U.S. Department of Energy (DOE) outlined a set of projects to expand domestic manufacturing capacity of batteries and other components used in the production of EVs and electric grids. Funded by the Infrastructure Investment and Jobs Act, the projects granted $2.8 billion to 20 companies to build and expand commercial-scale facilities in 12 states to extract and process lithium, graphite, and other battery materials, manufacture components, and demonstrate new approaches, such as manufacturing components from recycled materials. President Biden also announced the American Battery Materials Initiative, a new effort to mobilize the entire government in securing a reliable and sustainable supply of critical minerals used for power, electricity, and electric vehicles (EVs). This initiative will guide federal investments, both within and outside the country, to bolster the development of a full end-to-end battery supply chain, including access to critical minerals and other materials required for production and development goals.
An innovative project among the mix is a $100 million grant awarded to Koura, a chemical manufacturing company, to build North America’s first large-scale, commercial lithium electrolyte salt (LiPF6) production plant at its facility in St. Gabriel, California. This would allow the facility to use recycled lithium carbonate to produce LiPF6, an essential electrolyte salt for lithium-ion vehicle batteries to support production of more than 1 million EVs annually. While the funded projects are a notable step towards strengthening the American mineral supply chain, accelerating battery production to meet increasing demand, and bolstering the nation’s energy independence, most of the multibillion-dollar factories are still in planning or early phases of production.
Crucial Mineral Trade Wars
As carmakers around the world continue to battle to secure resources and materials needed for the rest of the decade to power the electric vehicle revolution, the competition is becoming fiercer. The world’s largest automobile manufacturers and governments are scrambling to secure their positions in the supply chain and safeguard supply. This challenge has become more complicated as China announced its decision this month to restrict critical mineral exports to Europe as a claim to increasing security measures. China is the largest global producer of gallium and germanium, two minerals that are crucial to the semiconductors, telecommunications, and EV industries. Given that the EU receives 71% of its gallium from China and 45% of its germanium, this import restriction presents a major roadblock in the EU’s efforts to decarbonize its economy. China’s decision to limit critical mineral exports exemplifies a trade tactic used by countries such as China and Russia to strengthen security tools through tight control of critical supply lines to advance political and military goals. Ironically, this shocking announcement came shortly after the EU launched its Critical Raw Materials Act in March to reduce the bloc’s dependence on Chinese suppliers. While this policy aims to ease financing and permitting for new mining and refining projects, the lengthy process required to get these projects up and running poses a threat to the EU’s supply chain in the meantime. While access to lithium has not been affected in this trade restriction, this geopolitical mineral battle exemplifies how access to critical materials that are essential to various industries can be used as a target in political conflict. As such, the need for independence in energy production is becoming a necessity to meet the continually growing demand for energy storage devices.
2023 Outlook
It’s undeniable that the demand for lithium batteries is rising in full force. Their applications in the EV industry aside, lithium batteries are essential to military systems and consumer, medical, and industrial electronics. While the United States has a significant natural endowment of lithium reserves, domestic production remains low when compared to other lithium-rich countries that make up the majority of global supply. While the United States is slowly developing its independent production, the Biden administration has announced that it will primarily rely on meeting U.S. lithium demand from foreign allies rather than focusing on increasing domestic production. While this decision may reduce momentum in developing independent production, it will allow the United States to secure an adequate supply of lithium and may be fitting for the time being as domestic lithium production projects have been riddled with backlash from critics citing environmental degradation. Additionally, as lithium demand continues to increase, the United States will need to engage in strategic collaborations with foreign companies to bolster their access to lithium production around the world and secure a strong footing in the global supply chain.
References
https://www.ft.com/content/7ca99f9f-3b67-489a-a83c-477b6b12764e
https://www.utilitydive.com/news/us-strengthening-lithium-supply-processing-ev-batteries/635338/
https://worldpopulationreview.com/country-rankings/lithium-reserves-by-country
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