Lithium Supply Chain
What is battery grade lithium, and why is it important?
Lithium is one of the critical ingredients in lithium-ion electric batteries. It is light and allows a high voltage, making it a perfect energy-dense material for rechargeable batteries. Lithium assets like brines and hard rock are a known raw source of lithium. Raw lithium must be converted into an intermediate, either lithium sulfate or lithium chloride, and then refined into a battery-grade product such as lithium hydroxide (LiOH) or lithium carbonate (Li2CO3) for use in battery manufacturing. These lithium-ion batteries are used in commercial applications such as electric vehicles (EVs), electronics, and energy storage systems.
Where does lithium come from?
Lithium is extracted from various feedstocks all around the world and available for refining into a battery-grade product as either lithium sulfate or lithium chloride, depending on the source. Lithium may be extracted from naturally occurring mineral sources such as brines and hard rocks, or from battery recycling. Here is a breakdown of all the raw sources for lithium:
- Salar brines: Lithium is available in seasonally flooded dry lakes called salars. The water from these salars are evaporated and the lithium is extracted and available for refining as lithium chloride.
- Geothermal brines: Lithium is available in underground geothermal saline solutions which are then pumped to the surface and cooled. Geothermal brines are the concentrated liquid that remains. Typically this brine is evaporated in ponds and made available for refining as lithium chloride.
- Petro-brines: Lithium is present in the brines that are brought to the surface during oil and gas extraction. The petrolithium present in these brines is available for refining as lithium chloride.
- Hard rock: Lithium can be mined from mineral rocks, such as spodumene and lepidolite. These materials are crushed, calcinated, and digested with acids. This produces lithium sulfate which is available for refining.
- Clays: Like hard rocks, lithium from clays are crushed, calcinated, digested with acids. The resulting lithium sulfate is then available for refining.
- Recycled batteries: Lithium is a finite naturally occurring resource. This means battery recycling is an important strategy for lithium extraction. Batteries are processed into ‘black mass’ by battery recyclers, and after a long process, lithium is extracted and available for refining as either lithium sulfate, lithium chloride, or a combination of both.
The high demand for battery-grade lithium
The boom in global electric vehicle (EV) sales and the push for a transition to renewable energy has caused a dramatic increase in the demand for high-quality battery-grade lithium (lithium hydroxide and lithium carbonate). By 2035, it is predicted that the most prominent automotive market segment will be fully electric vehicles.
Currently, there is a gap between the supply and demand for lithium; meaning the demand for lithium is greater than its availability. As the EV and renewable energy market continue to grow, so too will the disparity between the demand and availability of high-quality battery-grade lithium (lithium hydroxide and lithium carbonate). This may result in limited availability of EVs and products that rely on renewable energy for consumers.
Current State of Lithium Refining
The lithium supply chain is facing a paradox: while global lithium production has surged, driven by the rise of electric vehicles and energy storage, the refining capacity needed to convert raw lithium into battery-grade material remains heavily centralized and constrained.
Despite having significant lithium reserves and active mining operations in regions like North America, South America, and Australia, over 70% of global lithium refining still takes place in China. This dominance is not just a matter of scale, it’s structural. China has built a vertically integrated battery supply chain, from raw material processing to cathode and cell manufacturing, giving it unmatched control over midstream lithium conversion.
This geocentralization creates several critical bottlenecks:
- Geopolitical risk: Trade tensions and export restrictions, such as China’s recent move to limit exports of cathode material technologies, can disrupt access to essential processing capabilities.
- Supply chain delays: Lithium mined in one region often travels thousands of kilometers to be refined elsewhere, adding time, cost, and emissions.
- Market volatility: Overcapacity in Chinese refining has led to price instability, with producers facing zero or negative margins1.
- Energy security concerns: Nations dependent on foreign refining are vulnerable to supply shocks and lack control over critical battery inputs.
Even as new lithium projects come online globally, the lack of regional refining infrastructure continues to constrain the flow of battery-grade lithium into domestic markets.
The Case for Domestic Lithium Refining
To build a resilient and secure energy future, countries must invest in domestic lithium refining capacity. This is not just a strategic imperative—it’s an economic and environmental opportunity.
Domestic refining unlocks several key advantages:
- Energy Security
By refining lithium locally, nations reduce dependence on foreign processing and gain control over a critical link in the clean energy supply chain.
- Economic Value Capture
Instead of exporting raw lithium and importing refined products, countries can retain more value by processing domestically, supporting jobs, innovation, and industrial growth.
- Supply Chain Stability
Regional refining shortens delivery timelines, reduces exposure to geopolitical disruptions, and enables better coordination with upstream and downstream partners.
- Environmental Benefits
Co-locating refining with mining and recycling operations reduces transport emissions and supports circularity. Electrochemical refining technologies like Mangrove’s also eliminate chemical waste and enable acid recycling.
- Strategic Readiness
As demand for lithium grows, projected to increase nearly 500% in the U.S. by 20302, domestic refining ensures that supply can scale with demand, without relying on external actors.
Lithium hydroxide (LiOH) vs lithium carbonate (Li2CO3)
Lithium hydroxide stands out as the superior precursor material for cathodes and it will enable us to meet our clean energy mandates faster if its current supply chain challenges can be resolved and its production is prioritized.
Why lithium is used in batteries
Chemical properties of lithium make it an exceptional element for battery applications. If we search for lithium metal in the periodic table of elements, we will find it listed as the third “lightest” element and the “lightest” of all the metals in the entire table. This basically means that we get more electric charge per unit mass of lithium than any other metal. Using battery jargon, we would say lithium has a very high specific (or volumetric) capacity or a very high ability to store electric charge. When this charge is released, an electric current is produced, but that is only half of the story. We would also like to have a high voltage battery. Now, when one of the two electrodes in a battery consists of lithium, we can obtain high voltages, because the lithium metal has the highest tendency among all elements to lose it electrons and create an electric current. This ease of losing electrons leads to formation of a high voltage. Stored electric energy in a battery is a product of the battery’s capacity and voltage, so increasing any of these two (or even better increasing them both) leads to a high energy battery. Now, what are the two electrodes of LIBs generally made of? The positive electrode of an LIB uses a synthetic compound of lithium (e.g., LiNiMnCoO2) and the negative electrode uses graphite which is essentially graphitic carbon. When we charge the battery, lithium ions go to the graphite and makes LiC6 and upon discharge they would leave this lithiated graphite to make graphite and LiNiMnCoO2.
This process can be repeated many times, and that’s what makes these LIBs very effective rechargeable batteries. Materials like these have led to highest energy and power density batteries and are now shaping a rechargeable world. By the way, we don’t use pure lithium in the LIBs, because it is not sufficiently safe during cycling. To learn more about construction and operation of these amazing LIBs, check this video by Lesics.
What is the role of the lithium hydroxide and lithium carbonate, and which one is better for our battery-powered future?
The cathode materials commonly used in LIBs (e.g., LiFePO4 called LFP, or LiNiMnCoO2 – called NMC) are produced from lithium salt and other metal salt precursors using chemical processes. The lower energy density materials (or LFP) typically use lithium carbonate (Li2CO3) as one of their precursor chemicals. NMC materials, on the other hand, have higher energy density and are the preferred materials in many sectors such as the automotive industry. The lithium precursor for these materials is generally lithium hydroxide (LiOH). For this reason, demand for lithium hydroxide is now rapidly growing worldwide. In summary, efficient, low cost, and sustainable supplies of lithium hydroxide ensure cost effective and improved batteries for a global market.
Why is lithium carbonate still in demand?
Although basic science favours lithium hydroxide for the synthesis of LIB cathode material, the production and demand for lithium carbonate remains prevalent, due mostly in part to the origins of both compounds. Lithium is extracted from two primary sources: brine which contains dissolved lithium chloride and is pumped from underground reservoirs (e.g., in Chile) and from lithium-containing spodumene minerals, like in hard rock formations (e.g., in Australia). The source of lithium has traditionally dictated the refined form of lithium salt. Using current refining methods, brines (containing lithium chloride) have yielded lithium carbonate, whereas refinement from spodumene (lithium sulfate) can yield either lithium hydroxide or lithium carbonate. Using incumbent technologies, lithium carbonate can be further processed into lithium hydroxide, but this process includes added costs. Lithium carbonate has other important applications, for example, the manufacturing of glazes, ceramics, tiles, greases, and critically, as a medication to treat bipolar disorder.
The bottom line is that in many cases, such as brine-sourced lithium, lithium carbonate is cheaper to refine than lithium hydroxide, as it requires one less step. The higher cost of producing lithium hydroxide using current technologies along with the non-battery market keep lithium carbonate in high demand despite the benefits of lithium hydroxide in producing better batteries.