The lithium sector needs to invest $7 billion annually to keep up with demand (report) - Energy

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  • The world needs to pump 42 billion dollars into the lithium industry by the end of the decade
  • Europe and America plans to develop supply chains and pull the rug out of China
  • The cost of producing lithium outside China will be expensive
  • The shortage of raw materials limits the production of electric vehicles and requires manufacturers to participate in mining

Amid growing concerns about lithium scarcity, and growing Chinese influence on supply chains, there is an urgent need to increase investment in the sector.

An analysis by Benchmark Mineral Intelligence estimated that the industry would need $42 billion in investment to meet rising demand by the end of the decade, especially as the precious metal is used to make batteries for smartphones and laptops, as well as batteries for electric cars.

The report expects demand to reach 2.4 million tons of lithium carbonate equivalent by 2030, nearly four times the 600,000 tons projected this year.

Reducing dependence on China

According to the new report, the industry will require an investment of $7 billion annually from this year to 2028, to be able to meet projected demand by the end of the decade.

A side of the lithium extraction process (Image via Bloomberg)

These expectations come at a time when Europe and North America are looking to reduce dependence on imports from China, and develop domestic projects to produce lithium, according to Bloomberg.

The report indicated that this strategy requires doubling investments and mobilizing the largest amount of capital, compared to obtaining refined products from current sources, especially China, which controls supply chains, supported by economic blocs, high efficiency, and low labor and energy costs.

Curiously, another report published last month by consultancy Wood Mackenzie reached similar conclusions.

The company suggested that demand for lithium could rise from half a million metric tons in 2021 to nearly 3-4 million in 2030.

However, Wood Mackenzie believes that the sector will be able to provide the battery industry with what it needs; Thanks to the introduction of new technologies such as direct extraction of lithium, production is expected to increase by more than 300% between 2021 and 2030.

high cost

Co-author of the report, Cameron Birx, argues that producing lithium with minimal impact on environmental, social and governance practices would be prohibitive outside the Chinese market.

In the United States, the administration of President Joe Biden is pushing to speed up production of key metals in batteries, with investments of more than $3 billion, to help process these metals, including lithium.

Canada has allocated nearly $2.9 billion in this year’s budget to build domestic supply chains for vital minerals.

Part of the assembly of electric car batteries inside the Audi factory in Brussels – Photo from the company’s website

Last week, Green Lithium announced that it aimed to build and operate a massive lithium-processing refinery in the UK, and signed a deal with Trafigura to supply the refinery with the needed minerals.

Last year, car manufacturers including Tesla, General Motors and Ford unveiled investment plans in battery recycling to cut costs and reduce risks associated with global supply chains.

In contrast, lithium prices have risen more than 500% in China this year, as supply struggles to keep pace with the electric car boom.

For his part, Tesla CEO Elon Musk made a public appeal to invest in lithium mining, revealing that the electric car giant might consider mining or refining after prices rose to record levels.

According to the report, Simon Morris, CEO of Benchmark Agency, believes that the lack of raw materials for battery production is limiting the production of electric vehicles, and this means that manufacturers may have to participate in mining operations to expand the car industry.

The report pointed to the need to develop new mines, especially since the huge investments planned by major lithium producers are insufficient.

Unlike investors, car manufacturers can intervene for more than one reason, the most important of which is to secure supplies for the battery industry, as well as generate returns from lithium profits.

Challenges facing the sector

Before the advent of electric cars, lithium was used to treat ailments, such as depression and bipolar disorder, and quickly became a staple in the manufacture of batteries.

A Tesla battery pack inside the Giga Nevada plant – Photo courtesy of the Associated Press

With electric cars expected to dominate the market in the coming years, scientists face two challenges, one related to how to reduce metals in expensive batteries, and the other to improve battery recycling.

Auto and battery makers have begun spending billions of dollars to cut the cost of manufacturing and recycling electric car batteries, spurred in part by government incentives.

Researchers are also working to reduce the amount of metal used in batteries, which varies according to battery type and car model, but a single car lithium-ion battery pack (the type known as NMC532) can contain about 8 kg of lithium and 35 kg of nickel. 20 kilograms of manganese and 14 kilograms of cobalt, according to the Argonne National Laboratory.

It can be said that the cost of lithium-ion batteries has decreased compared to when they first appeared on the market in the early 1990s.

Bloomberg BNEF expects the cost of batteries to drop to less than $100/kWh by 2023.

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