CERAWeek 2022: Lithium producers need major investors to hike production for global decarbonization efforts

Lithium producers needs the backing of major investors as well as faster permitting and processing capabilities to raise their production for the world's decarbonization efforts, mining executives said at a 9 March panel discussion about battery supply chain disruptions.

Speaking at the CERAWeek 2022 conference by S&P Global in Houston, Lithium Americas President and CEO Jonathan Evans rued that the lithium industry doesn't enjoy the same level of financial support as oil and gas companies or its counterparts in the copper industry.

Compounds of lithium are crucial to the manufacture of energy storage batteries in electric vehicles, and other clean energy technologies, that are deemed essential to decarbonize the global economy.

With many governments and businesses committing to reducing emissions, S&P Global Market Intelligence estimates that global lithium demand will grow to 2 million metric tons (mt) per year by 2030 from 640,000 mt/year in 2022. 84% of all lithium produced is expected to go into battery making.

Funding is difficult because the global lithium market is relatively small with a size of roughly $4 billion, compared with the copper or oil and gas industries, Evans said.

"If you look at the companies involved, there's a limit to what they can do. They can really do one project or two at the same time," Evans said. Major investors are needed to be able to absorb the business risk that smaller companies cannot handle, he added.

He pointed to the recent announcement by global midstream energy and petrochemicals firm Phillips 66 to invest in the technology Novonix has developed to produce synthetic anode material used in lithium-ion batteries.

Risk profile is complicated

Also participating in the discussion was the CEO of Australian lithium miner Allkem, Martín Pérez de Solay, who said the risk profile of lithium projects is different from other mining projects because of the complexity involved. It's not just about mining the metal, but also providing the product that can be used in batteries that will be installed in cars.

"Sometimes investors will not realize the risks involved in the industry and they think that building a plant is easy," de Solay said.

Allkem is not facing the constraints as it is in the throes of expanding a mine in Argentina and firming up plans for a mine in Japan, according to de Solay.

Evans agreed that processing the mined lithium is vital, but he said, "you have to have the raw material to process."

Securing permits to produce the raw material can take anywhere from five to eight years, de Solay said.

However, Evans reminded the audience that Lithium Americas has spent 13 years securing permits for the Thacker Pass mine in Nevada that holds the largest known deposit in the US, owing to legal battles with the local communities over water resources and sacred lands.

During a question-and-answer session with CERAWeek Chairman Daniel Yergin on 9 March, US Secretary of Energy Jennifer Granholm acknowledged the absurdity of permitting delays. "How crazy is that," Granholm said, as she pledged to address it along with increasing more processing facilities as a priority to secure domestic supply chains.

The majority of the world's battery-grade lithium is produced by one of two means: mining or acid leaching from spodumene ores, such as those found in North Carolina; concentrating and precipitating as lithium carbonate from brines via evaporation ponds as is the case in Nevada. The lithium sulfate solution that is produced from spodumene ore can be converted to battery-grade lithium carbonate or hydroxide via electrochemical processes.

Processing woes

Evans acknowledged that the US lacks processing capacity to handle its own production, and that China is responsible for processing most of the world's lithium to battery grade product.

S&P Global Market Intelligence data shows only two operating lithium refineries in the US owned by Albemarle and Livent, respectively.

North Carolina-based Piedmont Lithium is expected in 2023 to begin extracting spodumene ores from its mine in North Carolina with the goal of producing up to 30,000 mt/year of battery-grade lithium hydroxide from a conversion plant. Piedmont said it has completed an economic assessment of a second plant that will double its processing capacity of 60,000 mt/year.

According to Morgan Bazilian, who heads the Payne Institute for Public Policy at the Colorado School of Mines, the battery supply chain disruption is not just limited to mining and processing, but goes all the way up to the advanced manufacturing stage. At that point, recycling needs to take place to increase supply

Bazilian faulted the Biden administration for framing the whole supply chain issue through the prism of competing with China.

"The average homeowner doesn't even know if the [solar] panels were made in China," he said.

--Contribution from S&P Global Commodity Insight Metals Editor Henrique Ribeiro.

Posted 09 March 2022 by Amena Saiyid, Senior Climate and Energy Research Analyst

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.