Threatened by shortages, electric car makers race for ...

BEIJING (AP) &#; Threatened by possible shortages of lithium for electric car batteries, automakers are racing to lock in supplies of the once-obscure &#;white gold&#; in a politically and environmentally fraught competition from China to Nevada to Chile.

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General Motors Co. and the parent company of China&#;s BYD Auto Ltd. went straight to the source and bought stakes in lithium miners, a rare step in an industry that relies on outside vendors for copper and other raw materials. Others are investing in lithium refining or ventures to recycle the silvery-white metal from used batteries.

A shortfall in lithium supplies would be an obstacle for government and industry plans to ramp up sales to tens of millions of electric vehicles a year. It is fueling political conflict over resources and complaints about the environmental cost of extracting them.

&#;We already have that risk&#; of not being able to get enough, said GM&#;s chief financial officer, Paul A. Jacobson, at a Deutsche Bank conference in mid-June.

&#;We&#;ve got to have partnerships with people that can get us the lithium in the form that we need,&#; Jacobson said.

Ford Motor Co. has signed contracts stretching up to 11 years into the future with lithium suppliers on two continents. Volkswagen AG and Honda Motor Co. are trying to reduce their need for freshly mined ore by forming recycling ventures.

Global lithium output is on track to triple this decade, but sales of electric SUVs, sports cars and sedans that rose 55% last year threaten to outrun that. Each battery requires about eight kilograms (17 pounds) of lithium, plus cobalt, nickel and other metals.

&#;There will be a shortage of EV battery supplies,&#; said Joshua Cobb, senior auto analyst for BMI.

Adding to uncertainty, lithium has emerged as another conflict in strained U.S.-Chinese relations.

Beijing, Washington and other governments see metal supplies for electric vehicles as a strategic issue and are tightening controls on access. Canada ordered three Chinese companies last year to sell lithium mining assets on security grounds.

Other governments including Indonesia, Chile and Zimbabwe are trying to maximize their return on deposits of lithium, cobalt and nickel by requiring miners to invest in refining and processing before they can export.

GM is buying direct access to lithium by investing $650 million in the Canadian developer of a Nevada mine that is the biggest U.S. source. In return, GM says it will get enough for 1 million vehicles a year.

Conservationists and American Indians are asking a federal court to block development of the Nevada mine, which the Biden administration has embraced as part of its clean energy agenda. Opponents say it might poison water supplies and soil and pollute nesting grounds for birds.

&#;Securing metals must not come at a sacrifice to the environment,&#; said a U.S. group, the Natural Resources Defense Council, in a report last year.

BYD Auto&#;s parent company, battery maker BYD Co., has announced more than $5 billion in investments in lithium mining and refining over the past 18 months.

Most are in China, but BYD also is promising to spend $290 million on a processing facility in Chile, one of the biggest lithium producers. In exchange, BYD is allowed to buy lithium from Chilean miners at a discount.

At home, BYD announced last year it would invest 28.5 billion yuan ($4.2 billion) in a venture to produce 100,000 tons of lithium carbonate a year in the eastern city of Yichun.

Another Chinese automaker, NIO Inc., bought 12% of Australian lithium miner Greenwing Resources Ltd. last year for 12 million Australian dollars ($8.1 million).

Despite rising output, the industry may face shortages of lithium and cobalt as early as if enough isn&#;t invested in production, according to Leonardo Paoli and Timur Gul of the International Energy Agency.

&#;Supply side bottlenecks are becoming a real challenge,&#; said Paoli and Gul in a report last year.

Automakers might be putting in their own money to reassure &#;notoriously risk-averse&#; miners, according to Alastair Bedwell of GlobalData. He said miners are reluctant to &#;go all out&#; on lithium until they are sure the industry won&#;t switch to batteries made with other metals.

Even if they do, developing lithium sources is a yearslong process.

Mines that came online in -19 took on average more than 16 years from discovery to the start of production, according to Paoli and Gul of the IEA.

&#;These long lead times raise questions about the ability of supply to ramp up,&#; they wrote.

Investment by automakers might &#;help to remove some of their partners&#; risk and ultimately create more production,&#; Bedwell said in an .

Worldwide lithium resources are estimated at 80 million tons by the U.S. Geological Survey.

Bolivia&#;s are the biggest at 21 millions tons, followed by Australia with 17 million and Chile with 9 million. China has 4.5 million tons of known reserves and the United States has 1 million.

Forecasts of annual global production range as high as 1.5 million tons by . But demand, if EV sales keep rising at double-digit annual rates, is forecast to increase to up to 3 million tons.

Sales of battery-powered and gasoline-electric hybrid vehicles took off in , more than doubling over the previous year to 6.8 million, according to EV Volumes, a research firm. Last year&#;s sales rose to 10.5 million.

China accounted for 60% of last year&#;s sales, two-thirds of production and three-quarters of battery manufacturing.

Ford plans to sell 2 million EVs a year by . GM, with sales of 3.6 million cars, has plans for 30 electric models and North American production capacity of 1 million two years from now in .

Toyota Motor Co.&#;s annual target is 3.5 million by . VW, which sold 4.6 million cars worldwide last year, is aiming for 70% of sales in Europe and 50% in China and the United States to be electric by .

President Joe Biden last year announced an official goal for half of all new cars sold in the United State to be electric or other zero-emissions technology by .

As sales rise, so does government unease, especially in Washington and Beijing, about access to lithium and other minerals and the potential for strategic competition.

Volkswagen&#;s battery unit, PowerCo, signed an agreement with Canada last August to develop suppliers of &#;critical raw materials&#; including lithium, cobalt and nickel.

The German chancellor, Olaf Scholz, in a statement welcomed cooperation with &#;close friends&#; on &#;raw material security.&#;

Last year, Canada imposed limits on foreign involvement in production of lithium and other &#;critical minerals&#; for batteries and other high-tech products.

China&#;s government has accused the United States, Canada, Japan and other governments of misusing phony security concerns to hurt Chinese competitors in electric cars, smartphones, clean energy and other emerging technologies.

Other governments welcome Chinese investment.

China&#;s biggest lithium producer, Ganfeng Lithium Co., bought Argentina&#;s Lithea Inc. last year for $962 million. In , Ganfeng bought Mexico&#;s Bacanora Lithium for $391 million. It is developing a project in the northern region of Sonora with planned annual output of 35,000 tons.

China&#;s Tianqi Lithium Inc. owns 23.8% of Chile&#;s dominant producer, Sociedad Quimicay Minera, or SQM.

About two-thirds of the world&#;s lithium comes from mines. That involves crushing rock and using acids to extract metals. It leaves toxic heaps of chemical-laced tailings.

The rest is extracted from salt lakes or from salt flats called salars in Chile and Bolivia. That can require vast evaporation ponds.

The industry is working on technology to extract lithium from hot springs, lakes and clay deposits with less environmental impact.

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VW has a five-year supply contract with Vulcan Energy Resources Ltd., which plans to produce lithium hydroxide from geothermal brine in Germany&#;s Rhine Valley.

Vulcan says its process uses no fossil fuels. That is a response to complaints EVs do little to reduce overall carbon emissions because energy for their manufacturing and charging usually comes from coal, gas and oil.

As they ramp up supplies, automakers face another bottleneck: Lack of refining capacity to purify raw lithium into battery material.

Tesla Inc. broke ground in Texas last month for a lithium refinery that CEO Elon Musk should produce enough for 1 million vehicles per year by .

&#;The choke point is much more on refining capacity than it is on mining,&#; said Musk in an April conference call with reporters.

Other manufacturers including BMW AG, which aims to make at least half its sales fully electric by , are buying stakes in lithium refiners.

As for GM, &#;I don&#;t know&#; whether it will build its own refinery, Jacobson said.

&#;Where I can help fund some expansion in exchange for guaranteed supply, that&#;s a good thing,&#; he said. &#;We should be open to doing that.&#;

Smaller brands without their own lithium supply might be squeezed, according to Bedwell. He said they might be forced to pay more, which might threaten the existence of some.

&#;Certainly, mass-market players who don&#;t get their lithium strategy right will be at a disadvantage,&#; said Bedwell.

An increased supply of lithium will be needed to meet future expected demand growth for lithium-ion batteries for transportation and energy storage. Lithium demand has tripled since [1] and is set to grow tenfold by under the International Energy Agency&#;s (IEA) Net Zero Emissions by Scenario.[2] Currently, the lithium market is adding demand growth of 250,000&#;300,000 tons of lithium carbonate equivalent (tLCE) per year, or about half the total lithium supply in of 540,000 tLCE.[3] For comparison, demand growth in the oil market is projected to be approximately 1% to 2% over the next five years.[4]

Leading experts estimate a supply deficit by the s, creating pressure to increase lithium production and processing. Benchmark Mineral Intelligence, an information provider on the lithium-ion battery supply chain, estimates a 300,000 tLCE supply deficit by in its business-as-usual demand scenario.[5] Albemarle, one of the largest lithium producers, estimates a 500,000 tLCE deficit by then.[6] Deutsche Bank sees an even greater shortage of 768,000 tLCE by .[7]

Upstream: Lithium Deposits

The upstream portion of the lithium supply chain, namely mining, is severely concentrated in a few countries: Australia, Chile, and China account for 90% of production.[8] (See Figure 1.) These three countries, together with Argentina, hold most of the economically viable reserves. The concentration, or grade, of the lithium resource is a strong determinant of economic viability. Other countries, such as Bolivia, possess lithium resources that are currently considered uneconomical. The limited geographical distribution of lithium production tightens the market despite the metal&#;s abundance in the earth&#;s crust.[9]

Higher lithium grades equate to lower capital and operating expenses per ton of lithium produced. Lower lithium grades lead to more mining, waste, and processing per ton. Lithium is found predominantly in salt brines (salars) or hard rock deposits. Brines can be directly processed into lithium carbonate, suited for cheaper but less energy-dense cathodes. To extract the lithium, brine in underground aquifers is pumped to the surface into a series of evaporation ponds. This process requires a hot and arid climate with considerable space, as the evaporation ponds can be kilometers long, making the Atacama Desert in Chile, for example, an ideal location. Brines are measured in milligrams per liter (mg/l) or parts per million (ppm), with brines over 200 mg/l considered economically viable.[10] Albemarle&#;s Salar de Atacama brine mine in Chile measures 2,211 mg/l.[11]

Hard rock deposits are measured in percentage of lithium oxide (Li2O).[12] These deposits can be processed into lithium carbonate or lithium hydroxide, which are used in higher energy-density cathodes. Australia is the leading producer of hard rock lithium, with the state of Western Australia being the main location for lithium mining.[13] The mineral spodumene has the highest lithium grade among hard rock deposits, and is economically viable at between 1% and 2% Li2O.[14] The Greenbushes mine in Australia, the largest spodumene mine in production, is 1.47% Li2O.[15]

Currently, the only lithium production in the United States is from Albemarle&#;s Silver Peak brine facility in Nevada.[16] Direct lithium extraction (DLE), an emerging lithium production technology, could allow for additional domestic brine production, especially in the Smackover region of Arkansas and the Salton Sea in California.[17] DLE could potentially allow for lithium brine production without evaporation ponds, with the brine being reinjected underground after lithium is extracted. There are currently no hard rock lithium mines in production in the United States, but production is expected to begin this decade at Lithium America&#;s Thacker Pass and Ioneer&#;s Rhyolite Ridge in Nevada[18] and Albemarle&#;s Kings Mountain in North Carolina.[19]

Many lithium mines located in American-allied countries are financed by Chinese investment, locking in existing and future capacity for Chinese companies. These investments have allowed China to further influence the supply chain despite lacking domestic resources. For example, Chinese companies have acquired lithium mining rights in Africa, Australia, and Latin America.[20] Chinese company Tianqi Lithium owns a 26% share in the Greenbushes mine and an approximately 22% share in SQM, a leading lithium chemical producer in Chile.[21] Chinese companies Ganfeng Lithium, CATL, and Huayou Cobalt have stakes in projects in Africa, Australia, and South America.[22]

Midstream: Lithium Processing

Lithium must be &#;processed,&#; or refined into a chemical in the form of lithium carbonate or lithium hydroxide, before being used in batteries. In the midstream sector, approximately 65% of the world&#;s lithium processing capacity is concentrated in China, solidifying the country&#;s dominant role.[23] (See Figure 2.) Chile and Argentina account for 29% and 5% of processing, respectively, focusing on in-country conversion of lithium from brines to lithium carbonate. Despite being the world&#;s largest lithium producer, Australia is only now trying to diversify into processing. Ninety-eight percent of Australian spodumene was exported to China for processing in fiscal year &#;23.[24]

Looking into the next decade, China is likely to strengthen its hold on lithium chemical production. The United States and Australia are expected to show remarkable increases in terms of growth percentage, but China is projected to more than triple its current capacity and maintain a commanding position, accounting for well over half of the world&#;s lithium processing.[25]

The local content requirements and foreign entity of concern restriction in the Clean Vehicle Tax Credit of the US Inflation Reduction Act incentivize the construction of lithium processing facilities outside of China. The Clean Vehicle Tax Credit attempts to build an ex-China supply chain for mining and processing by limiting the tax credit to vehicles whose critical minerals are mined and processed in the United States or Free Trade Agreement countries. Additionally, the foreign entity of concern restriction severely limits the role of Chinese companies in the supply chain, even when those companies are involved in mining or processing projects in Free Trade Agreement countries.[26]

Albemarle and Piedmont Lithium, an emerging American lithium company, are constructing lithium processing facilities in the United States and have received financial support from the US government.[27]

Notes

[1] International Energy Agency, &#;Critical Minerals Market Sees Unprecedented Growth as Clean Energy Demand Drives Strong Increase in Investment,&#; July 11, , http://bit.ly/3tcr7Q0.   

[2] International Energy Agency, &#;Critical Minerals Data Explorer,&#; accessed December 8, , https://bit.ly/3Tngjcu.  

[3]  Confidential Market Assessment; Andy Home, &#;Lithium Still Super-Charged as Supply Chases after Demand,&#; Reuters, December 15, , https://reut.rs/3RAIWBN.  

[4] International Energy Agency, &#;Oil ,&#; June , https://bit.ly/3NokzF3.  

[5] Simon Moores, &#;Opinion: Albemarle&#;s Turbo-Charged Demand Data Showcases Lithium&#;s Growing Supply Problem,&#; Benchmark Mineral Intelligence, January 26, , https://bit.ly/48awTR9.  

[6] Ernest Scheyder, &#;Lithium Producers Warn Global Supplies May Not Meet Electric Vehicle Demand,&#; Reuters, June 22, , https://reut.rs/3NokG3r.

[7] Lee Ying Shan, &#;A Worldwide Lithium Shortage Could Come as Soon as ,&#; CNBC, August 29, , https://cnb.cx/3t4iXcF.

[8] US Geological Survey, &#;Lithium,&#; mineral commodity summary, January , https://on.doi.gov/4acFfcF.   

[9] Seaver Wang et al., &#;Future Demand for Electricity Generation Materials under Different Climate Mitigation Scenarios,&#; Joule 7, no. 2 (): 309&#;332, https://doi.org/10./j.joule..01.001.

[10] Dwight Bradley et al., &#;A Preliminary Deposit Model for Lithium Brines,&#; US Geological Survey, , https://on.doi.gov/3GEpw8I.  

[11] US Securities and Exchange Commission, &#;Form 10-K/A, Albemarle Corporation,&#; https://bit.ly/3RhkDHI.

[12] SGS Minerals Services, &#;Hard Rock Lithium Processing,&#; , https://bit.ly/3NoRd9g.  

[13] Sergey Alyabyev, Murray Edstein, Aleksandra Krauze, and Mads Yde Jensen, &#;Australia&#;s Potential in the Lithium Market,&#; McKinsey & Company, June 9, , https://mck.co/48flijx; Geoscience Australia, &#;Lithium,&#; June 7, , https://bit.ly/3uQvW1P.

[14] IGO Limited, &#;Greenbushes Lithium Operation Site Visit Presentation,&#; July 31, , https://bit.ly/46TtIfp.  

[15] US Securities and Exchange Commission, &#;Form 10-K/A, Albemarle Corporation&#;; International Energy Agency, &#;Critical Minerals Market Review ,&#; July , https://bit.ly/3TjaVHi.   

[16] Albemarle, &#;North America,&#; accessed December 8, , https://bit.ly/41krUuW.

[17] Standard Lithium, &#;Arkansas Smackover Projects,&#; accessed December 8, , https://bit.ly/3RDjhbA; US Office of Energy Efficiency & Renewable Energy, &#;US Department of Energy Analysis Confirms California&#;s Salton Sea Region to Be a Rich Domestic Lithium Resource,&#; November 28, , https://bit.ly/3RCYTHH.  

[18] Lithium Americas, &#;Thacker Pass,&#; accessed December 8, , https://bit.ly/3RD3YzG; Ioneer, &#;Rhyolite Ridge Lithium-Boron Project,&#; accessed December 8, , https://bit.ly/48ec3A6.

[19] Albemarle, &#;The Proposed Mine Project: Kings Mountain, a World-Class Facility, a World-Class Resource,&#; accessed December 8, , https://bit.ly/3t4jXxr.

[20] Jiyeong Go, &#;Chinese Companies Expanding Footprint in Global Lithium Mines,&#; FDI Intelligence, August 29, , https://bit.ly/3uYJCbq.  

[21] Tianqi Lithium, &#;Investments,&#; accessed December 8, , https://bit.ly/3TmaDj8.

[22] Ahmed Mehdi and Tom Moerenhout, &#;The IRA and the US Battery Supply Chain: Background and Key Drivers,&#; Center on Global Energy Policy, Columbia University, June , https://bit.ly/41pxL2c.

[23] International Energy Agency, &#;Critical Minerals Market Review .&#;

[24] Australian Department of Industry, Science and Resources, Office of the Chief Economist, &#;Resources and Energy Quarterly,&#; September , https://bit.ly/3RlrWOq.

[25] International Energy Agency, &#;Critical Minerals Market Review .&#;

[26] Kevin Brunelli and Tom Moerenhout, &#;China Hawks Are Putting the Green Transition at Risk,&#; Foreign Policy, December 6, , https://bit.ly/3GE0ruF; US Internal Revenue Service, &#;Credits for New Clean Vehicles Purchased in or After,&#; accessed December 8, , https://bit.ly/3RCp4xY.

[27] US Department of Energy, &#;Bipartisan Infrastructure Law Battery Materials Processing and Battery Manufacturing & Recycling Funding Opportunity Announcement,&#; October , https://bit.ly/3RCKsmT.

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