With Lithium, We Risk Missing The Forest For The Trees
Author: Saad Dara
Goldman Sachs recently produced a report suggesting the lithium market will experience a “sharp correction” as lithium and other commodity prices continue to rise. Shortly after the release, other analysts in the lithium sector disagreed with Goldman, saying that the firm has made mistakes in the past and doesn’t have a clear understanding of the market. Under current paradigms, if Goldman is right, existing lithium operations may not be as profitable as they potentially could be— threatening Li supply and EV adoption. If industry experts like Mr. Lowry are right, Lithium prices will remain high, drive-up EV prices, and threaten EV adoption for the foreseeable future.
We won’t wade into the merits of either argument because, either way, the underlying facts remain that the “sharp correction” Goldman predicts is a function of market volatility caused by a brittle and over-concentrated supply chain. The volatility here is because we have rising demand, but an uncertain supply. For the market to achieve a stable foundation price, high or low, it must achieve a stable and reliable supply chain.
We are more concerned with helping to craft a roadmap for the future, one that lithium producers and policy makers can rely on to build a more electrified future.
Today’s price volatility is driven by supply imbalances and long lead-times, but a larger supplier base and more localized refineries could help develop a more stable environment. A resilient supply chain can be developed by distributing the stages of the value chain currently over-concentrated in Asia.
Existing technology can help achieve this with proper policy and investments to help it scale.
Countries in Europe, North America, and parts of Asia are beginning to recognize this reality:
- President Biden recently invoked the Defense Production Act for lithium production
- European Commissioner for Internal Markets Thierry Breton, wrote it was “high time to act” to boost lithium production.
- A new multi-national partnership, the Minerals Security Partnership, was created to help ensure adequate supplies of lithium and other critical materials.
“Feedstock-flexible” platforms for Li production, like Mangrove’s, are another example of innovation that can help address the unnecessary risks in our lithium supply chain. Feedstock flexibility allows refiners to accept feedstock from a variety of resources around the world – brines from Chile, or hard rock from Australia, or beyond. This type of technology will become increasingly important as demand for lithium batteries rises because it will increase the amount of lithium available for refining with newly unlocked resources.
By co-locating new refining capacity alongside battery manufacturing in the EU and North America, the two regions develop localized battery value chains to support EV adoption. The development of more local operations will provide end-users better prices, manufacturers better margins, and regional governments more energy independence.
No matter which side you take on the pricing debate, it would serve our industry well to focus our attention on creating a distributed and easily scalable value chain for long-term viability. Stability and predictability will lead to improved project bankability for all involved.