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Lithium: Is There a Supply Shortage of "White Gold" in the Future?

Updated: Mar 16, 2023

Lithium is a non-ferrous metal known as “white gold”, and is one of the key components in EV batteries, alongside nickel and cobalt. But rising demand for Electric Vehicles is straining global lithium supplies.

Sales of electric vehicles doubled from 2020 to 2021

According to International Energy Agency (IEA), the global sales of electric vehicles increased to 6.6 million in 2021 from 3 million a year earlier.

This means that electric vehicles represented 9% of the global automotive market.

Not all the world’s lithium can go into EV batteries. The metal is also used in batteries for many other items, such as laptops and mobile phones, as well as to make planes, trains and bikes.

The global demand for lithium expected to triple from 2023 to 2030

While the global lithium reserves are theoretically sufficient to meet the expected increase in demand, “only a handful of companies can produce high-quality, high-purity lithium chemical products,” the IEA says. “While several planned expansion projects are in the pipeline, there is a question mark over how rapidly their capacity can come online.”

Lithium mines that started operations between 2010 and 2019 took an average of 16.5 years to develop, according to the IEA report The Role of Critical Minerals in Clean Energy Transitions. In addition, McKinsey estimates that over 80% of mining projects are completed late.

The IEA says the world could face lithium shortages by 2025. And Credit Suisse says lithium demand could treble between 2020 and 2025, meaning “supply would be stretched”.

“There simply isn’t going to be enough lithium on the face of the planet, regardless of who expands and who delivers, it just won’t be there,” Lake Resources Chairman Stuart Crow told the Financial Times. “Car makers are starting to sense that maybe the battery makers aren’t going to be able to deliver.”

Volkswagen, the world’s second-largest car manufacturer, has already sold out of EVs in the US and Europe for 2022. Ford’s E-Transit van sold out before production had even begun.

Lithium extraction is mined with geopolitical tensions

“China owns basically 70-80% of the entire supply chain for electric vehicles and lithium-ion batteries,” Lake Resources’ Stuart Crow told the Financial Times. The IEA puts China’s share of global lithium chemical production at 60%, and says it accounts for 80% of lithium hydroxide output. “Five major companies are responsible for three-quarters of global production capacity,” it says.

Australia had the highest production in 2021, according to the US Geological Survey, but Chile has the world’s biggest lithium reserves. The South American country is part of the so-called “Lithium Triangle”, along with Argentina and Bolivia. Just under 60% of Earth’s lithium resources are found in these three countries, according to the 2021 US Geological Survey’s Mineral Commodity Summary.

However, lithium extraction requires very high volumes of water, and this is leading to problems around water stress – a situation where a region’s water resources are not enough to meet its needs.

This is particularly concerning given that a lot of lithium is found in drought-prone regions – such as South America and Australia. Bolivia’s San Cristóbal mine reportedly uses 50,000 litres of water a day, and lithium mining companies in Chile have been accused of depleting vital water supplies.

More than half of today’s lithium production is in areas with high water stress, the IEA says. “Several major producing regions such as Australia, China, and Africa are also subject to extreme heat or flooding, which pose greater challenges in ensuring reliable and sustainable supplies,” it adds.

Serbia this year withdrew permits for a lithium mine because of widespread protests. The demonstrators said the site would contaminate water supplies and damage the landscape irreversibly.

Words of wisdom from a wedding planner

Electric vehicle mandates can be viewed as a confirmed wedding date with invitations being sent to current drivers.

But what if there is a shortage of champagne and food to feed all the guests?

The wedding may have to be scaled back or rescheduled.

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