Lithium Shortage and Supply

Lithium comes from spodumene ore via hard rock mining or from metallic brines stored in man-made ponds in the high deserts around the world, South America primarily. If brine is the source material, water has been pumped into the earth, usually in a very remote location, to create a brine that is captured in storage ponds. Natural evaporation over 18-24 months results in lithium carbonate. Lithium carbonate can be chemically converted into lithium hydroxide.

The alternative to a brine operation is the hard rock mining of spodumene ore.

Australia is the world’s largest lithium producer. They have a government forecast for the lithium market. Lithium supply-and-demand will be tight in 2023. In a quarterly report issued in December, it said world demand is estimated to rise to 724,000 metric tons of lithium carbonate equivalent by 2023, from 486,000 metric tons in 2021, as “global EV uptake rises”. Total global production, measured as lithium carbonate equivalent, was forecast in December at 485,000 tonnes in 2021, growing to 615,000 tonnes in 2022 and 821,000 tonnes in 2023, according to Australia’s Department of Industry.

486000 metric tons of lithium carbonate made about 100000 tons of lithium for car batteries. Tesla needs about 10 kilograms of lithium per 50 kwh car. This would seem to mean that if all the lithium went to pure battery electric cars (BEV) then the 2021 supply would have been enough for nearly 10 million cars. There ended up being a mix of BEV and plug in hybrids and stationary storage. If the raw lithium carbonate is increased like Australia projects then that is enough for maybe 18 million BEVs in 2023. However, plug in hybrids and stationary storage will still be made. This is the raw material shortage issue for lithium. Getting to 9 million BEV in 2022 and then 15 million EV in 2023 will be pushing the limits of the lithium ramp.

The Bank of America has a forecast for the lithium market. There were about 4.2 million EVs made in 2021. This required about 176,000 tons of lithium (hydroxide?). If the Bank of America is correct and the percentage of lithium used for electric cars stayed about the same as 2021, then we would have enough Lithium for 29-30 million BEV in 2027. This could increase by 20% with improved efficiencies converting energy into movement. This would be about 36 million BEV in 2027. This goes to Tesla wanting to find ways to enable a faster conversion of the 2 billion global cars in 2027 to all electric. Tesla has talked about a Tesla Master Plan 3 to get all of the materials and supply chain to accelerate the electrification of the world. I would estimate that Tesla would want to at least double the availability or use of key materials to enable 80 million BEV in 2027 and then a further doubling by 2035 to enable abundant batteries for cars and for stationary storage.

Benchmark Mining also forecasts lithium and thinks B of A is being overly optimistic.

Benchmark Mineral Intelligence outlined 5 fundamental reasons as to why the oversupply of batteries call is wrong.

* Industry cannot reply on Chinese supply, China has traditionally produced low quality lithium
* Capacity does not equal supply
* New lithium supply comes at a higher cost base
* Contract pricing is important
* Lithium chemical capacity may not meet downstream specifications

Several Australian -listed lithium players are expected to come online in the next couple of years (and ramp up in subsequent years), notably:

2022: Core Lithium (ASX: CXO)

Mineral Resources’ (ASX: MIN) Mt Marion ramp up

2023: Sayona Mining (ASX: SYA)

2024: Lake Resources (ASX: LKE), Liontown Resources (ASX: LTR)

Allkem’s (ASX: AKE) James Bay and Sal de Vida projects

2025: Leo Lithium (ASX: LLL)

By tonnage, the most significant projects/companies are:

Mineral Resources’ Mt Marion stage two upgrade to 900,000tpa

Liontown’s Kathleen Valley project producing 511,000tpa (increasing to 658,000tpa)

Liontown expects to supply around 5% of global spodumene in 2024