Will Lithium Shortage Kill The EV Industry?

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First I thought we should talk about where you can find lithium today. The truth is it’s likely on your body right now, you may be holding it in your hand, or you’re looking directly at it.

But you might be surprised to know it’s also used in things like tools, aerospace equipment, military applications and backup storage for our Electric grid. And of course, Tesla’s and other electric cars

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It is so good for batteries that 39% of all Lithium production goes towards battery production. So what is Lithium anyway?

Lithium itself is a soft, silvery-white alkali metal. It is the lightest metal and the lightest solid element. Like all alkali metals, lithium is highly reactive and flammable. So this isn’t something you’d want just laying around your house.

Especially if you have a toddler running around like I do…

So Lithium is a metal so it must be mined right, like copper? Well, not exactly.

It’s true lithium can be mined from rocks but mostly it’s found in brine pools. Lithium is also present in seawater but there aren’t any commercially viable methods of extracting it at this time

As an aside when you see a meme floating around the internet showing a giant mine where lithium comes from, it’s a lie.

As of 2017, most of the world’s lithium production is in South America, where lithium-containing brine is extracted from underground pools and concentrated by solar evaporation. The standard extraction technique is to evaporate water from brine. Each batch takes from 18 to 24 months.

With so much demand for lithium it’s a fair question to ask…

Are Tesla and others doomed?

Well…not really

The US Geological Survey’s report for 2017 shows that “Worldwide lithium production increased by an estimated 12% in 2016 in response to increased lithium demand for battery applications. Production in Argentina increased nearly 60%, primarily owing to a new brine operation; the leading Argentine producer also increased production. A producer in Chile reported that its production rose by 20%. Two small Australian spodumene operations, one new and one inactive since 2013, planned to begin commercial concentrate production by year end.

Worldwide lithium production capacity was reported to be 49,400 tons in 2015; capacity utilization was estimated to be 64% in 2015 and 71% in 2016. Based on average projections by producers and industry analysists of about 14% growth worldwide, consumption of lithium in 2016 is projected to be about 37,800 tons, up from 33,300 tons in 2015.

So the trend is going up, but when you look at the overall picture you find that owing to continuing exploration, lithium resources have increased substantially worldwide. Identified lithium resources in the United States, from continental brines, geothermal brines, hectorite, oil field brines, and pegmatites, have been revised to 6.9 million tons. Identified lithium resources in other countries have been revised to approximately 40 million tons.

Identified lithium resources in Argentina and Bolivia are about 9 million tons each and in major producing countries are Australia, more than 2 million tons; Chile, more than 7.5 million tons; and China, approximately 7 million tons. Canada’s lithium resources are about 2 million tons. Congo (Kinshasa), Russia, and Serbia have resources of about 1 million tons each. Lithium resources in Brazil and Mexico are approximately 200,000 tons each and Austria, and Zimbabwe have more than 100,000 tons each.

Beyond just producing more lithium, companies like Tesla have focused on creating a closed-loop battery recycling program since as early as 2011.

So while Tesla drivetrains are rated to go 1M miles, and the batteries will likely last to last north of 350K miles, once the cars do get turned in, Tesla isn’t going to just throw away those precious metals.

If you’re an investor in companies reliant on lithium for their batteries such as Tesla, Apple, Google, or any other company making electronics today, you shouldn’t worry about the supply chain.

We’ve got a long road ahead of us and probably by the time we need to worry about a shortage of Lithium we’ll have a new way to make batteries that are even better.

// Sources