Lack Of Mining Capacity Threatens To Upend Global Lithium Race

A lack of mining capacity, despite billions in investments, will remain the most challenging obstacle the world faces in meeting the booming demand for lithium, a key element in the production of electric batteries and other green transition products, analysts told Sputnik

WASHINGTON (UrduPoint News / Sputnik - 17th March, 2023) A lack of mining capacity, despite billions in investments, will remain the most challenging obstacle the world faces in meeting the booming demand for lithium, a key element in the production of electric batteries and other green transition products, analysts told Sputnik.

The US Geological Survey (USGS) estimates that 98 million tons of lithium - often referred to as "white gold" - can be found beneath the earth's surface.

And that was before Iran, earlier in March, said it found a deposit containing 8.9 million tons of lithium and India said it discovered a deposit with 5.9 million tons of lithium.

Despite the wealth in raw material resources, however, the International Energy Agency (IEA) forecast significant shortfalls by 2040.

Current production would have to jump by at least 3-4 times to meet the demand for electric batteries alone, each of which contains about 15-20 pounds of lithium, with electric car sales expected to reach 40 million units per year in 2030 - around 60% of all sold.

"There's no shortage of lithium out there in the lithosphere - the crust of the planet," Adam Smith Institute Senior Fellow Tim Worstall told Sputnik. "The only shortages can be of plants or mines that can extract it in any particular year."

He noted how identified world lithium resources grew nearly 10 million tons in a single year, from 89 million in 2021.

"This 'big' Iranian find is less than the amount we find each year now that we're all seriously looking for more resources of lithium," he said.

The problem, he added, centers on extracting and processing the materials. For example, Worstall predicted it could take at least a decade to bring Iran's lithium to market.

According to Benchmark Mineral Intelligence (BMI), it takes about 4-7 years on average to build a lithium mine versus 24 months to build a battery plant.

The US just began construction on a new lithium mine in Nevada, to much fanfare, a site discovered by Chevron initially in the 1970s, that has gone through exploration, development, and permitting since 2008.

The process is likely to remain lengthy, but at a minimum is being accelerated, backed by the might of state.

The Biden administration and corporate titans like GM and Tesla have invested billions to boost manufacturing and strengthen supply chains for critical minerals like lithium, along with rare earths and battery metals like copper, nickel, graphite, and cobalt.

And UBS earlier this week forecast that China's ramp up of lithium extraction could see it accounting for nearly a third of the world's supply by mid-decade. China will tap resources in Africa to raise annual output to 705,000 tons, according to the investment bank.

Meanwhile, paradoxically, prices for lithium carbonate have crashed in recent weeks, down about 50% from all-time highs in November, amid expectations of a near-term surplus and despite long-term forecasted shortfalls.

This likely comes as a huge relief for automakers and battery producers. In April, Tesla CEO Elon Musk tweeted that the price of lithium had gone to "insane levels," noting that it sat at $4,450/ton in 2012 and reached $78,000/ton in 2022.

He also said the company may have to get into mining and refining itself unless costs improve and the pace of extraction and refinement quickens.

Although the price plummet may be good news for companies that consume lithium, miners have warned that if commodity prices fall too low, they will not be able to afford exploration and development costs. BMI has projected that the lithium industry will need to invest $42 billion by the end of the decade to meet demand.

Andrew Hecht, a commodity futures analyst with over 35 years on Wall Street, said the lithium surplus makes sense because of the price rise.

"EVs are bullish for lithium as the batteries require the metal... but the price has already made great strides on the upside," Hecht told Sputnik.

Hecht said he thinks copper, another battery metal, is the better more liquid investment choice at this stage.

At the end of the day the price, supply, and demand of all these battery and green metals depends on developments in one single country, Hecht added - that being China.