Electric car boom turbo charges rare metals race
The bubble has not burst – lithium will be crucial for the growth in green vehicles for years to come, writes Hasan Chowdhury
More than 11,000ft up in the Andes mountains of south-west Bolivia lies Salar de Uyuni, a remote salt flat that is home to some of the world’s largest reserves of lithium. Largely untapped, the seemingly endless expanse of bright white salt plains are on the verge of a frenzy of activity as a global scramble erupts to extract the metal and secure supplies for lithium-ion batteries – a basic building material for the electricvehicle industry.
Last month, Germany struck a deal with Bolivia under which YLB, a state-owned chemicals firm, will work alongside German industrial company ACI Systems to produce 40,000 tons of lithium per year in Salar de Uyuni once operations begin in 2022.
With the International Energy Agency predicting the number of electric vehicles on the road globally to hit 125m by 2030, the rush for lithium and other battery metals such as cobalt is attracting players old and new. Established player Albemarle is bringing lithium mines online in Western Australia, while Erik Prince, the founder of US private military contractor Blackwater, has plans to launch a $500m (£392m) fund focused on battery metals.
But valuing resources like lithium, which suddenly grab the attention of global investors, is never easy. Prices have proved extraordinarily volatile, plunging 29pc last year from $158 to $111 per kilogram and prompting many to ask: has the lithium bubble already burst?
Brian Menell, boss of mining specialist Techmet, says it remains a sound long-term bet.
“Last year there was a degree of over exuberance in some of these markets including lithium and cobalt that resulted in speculative hype, and the price ran further than the fundamentals justified,” he says. Either way, Menell, who has worked in the mining industry for 25 years, thinks the price correction is now overdone. Since founding Techmet in 2017, he has made battery and technology metals, such as lithium, cobalt and nickel, his sole focus. They will be “the key ingredients of the tech Brine pools from a lithium mine belonging to Us-based Albemarle on the Atacama salt flat in Chile
revolution”, he says, claiming the industry is at a nascent stage but high demand for battery metals in future is inevitable as industry and global governments seek to curb emissions to tackle climate change and poor air quality.
Adding an extra geopolitical twist has been China, which has worked doggedly over the past 15 years to secure control of the best resources of battery metals “while everybody else was sleeping”, according to Menell.
The need for Western nations to secure a role has grown more urgent, he says. “The drive to counter or balance China’s control is one that is in the minds of government agencies in the US and Japan and to an extent in Europe.”
Dr Benjamin Jones, managing consultant at CRU Group, says: “Lithium demand is set to double between 2017 and 2023, driven predominantly by growth in EV production and sales. Demand for battery-grade lithium is forecast to triple over this period.”
By comparison, demand for copper is expected to increase only 2-3pc per year. Despite the difficulty extracting lithium from locations such as Bolivia, where rainfall can cause flooding, Menell predicts strong demand.
“There will be a massive dislocation over the next five, 10 and 15 years between the demand for these metals and the supply, which will result in … [them] outperforming other commodities by many multiples,” he says.
Lithium comes from two chief sources: either a hard rock called spodumene found in Australia, or a brine that forms beneath the highaltitude salt flats of Chile, Argentina and Bolivia.
Though downward pressure on price is likely to endure for a few years as the market enters a phase of “oversupply” the metal remains in a good position, he adds.
Techmet is looking at hard-rock lithium projects in Africa, rather than brine-based ones. With a current glut of supply, lithium-based batteries look to be the mainstay for the future of the electric-vehicle industry.
However, not everyone is convinced. Earlier this week, a lawsuit was filed against Tesla after the death of an 18-year-old passenger in Florida was linked to a defective battery, raising questions over the safety of lithium-ion technology, which is highly flammable.
New technologies are being explored. Flow batteries, which use a metal called vanadium, have emerged as a contender. Solid-state batteries, another alternative, carry reduced risk and have been of particular interest to Sir James Dyson, who is building his own technology.
However, Menell predicts flow batteries being directed more towards grid storage, and attempts to bring new technology to the transportation industry could prove very expensive.
“In my view, in the next 10-15 years lithium-ion batteries will dominate for electric vehicles,” he says. “At the moment, it’s probably $30bn, $40bn going into lithium-ion battery manufacturing capacity in China and elsewhere in the world, and every car company in the world has a programme for their fleet to be dominated by lithium-ion battery-driven vehicles.”
And with China keen to clean up its air pollution, demand in the Far East remains robust. “Although policy targets have been reined in, Chinese regulators still require rapid improvements in the energy density of EV batteries.
“This will significantly impact the competitive landscape for different battery technologies in the years ahead,” says Jones.
Prices may bounce around in the short-term, but one thing is clear: the world will need a lot of lithium.
A woman drives a Renault Twizy two-seat electric car in Rome. Lithium-ion batteries are likely to dominate as the power source for electric vehicles for the next 10-15 years, says Brian Menell