Decentralizing The Lithium Supply Chain
Mitigating The Global Lithium Shortage
Author: Saad Dara
In ways big and small, most of us in North America and Europe have firsthand experience of the supply chain imbalances that COVID exposed over the last two years. Products as complex as microchips (or lithium, for that matter) and as simple as toilet paper faced shortages, and some still do as COVID flares. Even during the less-deadly Omicron wave, the city of Shenzhen was placed on total lockdown after an outbreak of COVID cases, complicating ongoing supply shortages. The war on Ukraine has contributed to significant price increases for commodities like nickel and squeezed trade further. The lithium supply chain has not been immune to these symptoms either.
There are many articles about the “lithium shortage,” but they rarely address the high concentration of lithium refining operations in Asia. And as we try to leave COVID behind while freeing ourselves from fossil fuels, we face the reality that manufacturing and supply chains for EVs are incredibly complex, exposed to political and trade risks, and rely heavily on one region.
The availability and price of battery-grade lithium once were overlooked pillars in our EV transition. That has changed as this precious commodity becomes increasingly difficult to acquire. Recently, the Biden Administration in the U.S. announced the use of special legislation, the Defense Production Act, to boost multiple sectors including lithium production as a national security measure. EV giant Tesla has also voiced concern about the availability of lithium and is exploring options to enter the field to secure a more resilient supply for their EV manufacturing.
Part of the challenge arises from the longstanding reality that most lithium-containing minerals cannot be cost-effectively refined into a battery-grade product at the point of extraction or even in the country of origin. The minerals must be shipped overseas as part of a fragile supply chain for conversion into actual battery-grade material. More than cost-intensive, at times this process can be cost-prohibitive.
Even bankable lithium extraction operations face this central challenge: most refiners operate in Asia, away from the most productive extractors in Australia, Latin America, and North America. And that was all before the serious shortcomings of our global supply chains were revealed over the last few years.
When material supply chains are over-concentrated and imbalanced, it presents liabilities for everyone, including extractors, refiners, and manufacturers — all of whom are vulnerable to the slightest disruption in supply.
Today, companies in Asia do most of the world’s lithium refining and produce most EV batteries. At times, extracted lithium is shipped to Asia, refined, and then shipped back to the country of extraction for battery manufacturing. While EV demand explodes worldwide, this unnecessarily complex process raises risks for extractors, refiners, manufacturers, and end-users situated elsewhere. It increases supply chain exposure and costs, making a tough market even more challenging. It also raises the unreasonably high threshold for project viability with less common assets such as lithium-rich clays, further constricting the available supply.
This bottleneck will hinder our rate of EV production and deployment. In fact, current predictions from Benchmark Minerals Intelligence currently estimate that by 2040 there will be such a significant lithium supply shortage, that we estimate it will prevent as many as 350 million EVs from being adopted. We are living through the consequences of this problem already. Lithium prices are beginning to “soar” in the face of rising demand.
What follows is not easy to pinpoint, but it likely doesn’t bode well for our global climate goals.
Decentralizing Lithium Conversion: An Emerging Solution
What if a new lithium refining platform could unlock unleveraged deposits worldwide?
Emerging technologies aiming to accelerate the EV transition must close the supply-demand gap. The main priorities are unlocking several types of untapped deposits worldwide, distributing globally, and co-locating next to parts of the battery value chain to maximize efficiency. We can meet our goals in three ways:
- improving refining technologies to process multiple feedstocks;
- simplifying the steps in the value chain to reach a battery grade product; and
- de-risking the existing supply chain by developing distributed operations.
A “feedstock-flexible” platform like Mangrove’s will allow lithium users or producers to accept feedstock from any number of resources around the world, turning them into viable reserves. Depending on scale, the platform could be built and deployed anywhere globally. With reduced CapEx costs lowering the threshold for entry, smaller scale and more versatile systems could be deployed to make the supply chain more resilient and better equipped to scale alongside booming EV demand.
This will help insulate small- to mid-sized existing lithium producers and extractors from the need to join operations with more prominent players or depend on an overseas refiner. It will also lower the threshold for other innovators and disruptors to enter the space, further easing the refining bottleneck created by the over-concentration of large refineries in Asia.
The implications of this platform would be dramatic. The pending supply-demand gap is an opportunity to help mitigate the effects of climate change while bringing more lithium – and more EVs – to the market.
Mangrove’s Vision: Unlocking a Battery-Powered Future and meeting lithium demands
We understand the challenges that the global supply chain faces and that new players are necessary to change the existing paradigm. Mangrove focuses on enabling new players to be part of the revolution and helping incumbent players grow. Our innovative conversion platform is feedstock-flexible. Its ability to economically and efficiently process multiple materials means un-utilized lithium assets – for which cost-effective extraction technologies do not exist – are newly available for battery manufacturing. It can improve project bankability by reducing cost and improving performance on the refining side.
A good example is lithium brine assets. Typically complex and cost-intensive, brines produced using Mangrove’s platform could compete with battery-grade product from other feedstocks at even lower prices. This technology will change the face of lithium refining globally and simultaneously speed EV adoption.
By unlocking more lithium deposits, we convert them into fully leveragable assets. The platform’s footprint and modular scalability allow it to be readily customized to meet extractors’ or refiners’ ability and co-located near extraction sites or battery manufacturers.
Current models and business practices account for shipping time and the associated geopolitical risks that come with a global supply chain. Using our technology, these issues will be significantly less meaningful when considering a new refining or manufacturing project. With reduced CapEx and OpEx for refining plants, existing extractors and battery manufacturers can vertically integrate the battery value chain more efficiently, disrupting incumbent operations with refineries scaled to individual needs.
Innovative technology like this empowers small- to mid-sized existing lithium producers and extractors to have more agency in their operations. It lowers the threshold for other businesses to join the space. This will cut the refining bottleneck caused by centralized operations now clustered around large refineries in Asia and reduce the current predicted supply chain pinch.
Decentralizing lithium conversion with cost-effective, globally distributed refining plants lessens the current over-reliance on an increasingly brittle and narrow supply chain. It also makes battery-grade lithium more accessible and affordable for a world that’s driving to an electrified future.
If you want to open a dialogue to understand better the lithium supply chain and how it’s poised for change, we welcome your comments.