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Lithium Special 1: The lithium battle enters the era of direct investment by OEMs (Part 1)

On 31 January, the same day that the author attended the Battery Summit organised by IRuniverse at the Shinjuku Hilton Hotel, major news arrived suddenly that the US car manufacturer GM had invested in Lithium America, a mining company developing lithium.

 

If you are in the industry, such direct upstream involvement by OEMs may not come as a surprise, as it is a recent development. Volkswagen and Strantis have signed lithium offtake agreements with Vulcan Energy, which is developing geothermally derived lithium, and Tesla has a similar agreement with Piedmont Lithium. However, the amount. It is a whopping USD 650 million. A huge sum of about 85 billion Japanese yen was contributed by car manufacturers to secure lithium, which is only one of the battery materials. Lithium America has been mentioned in the last few quarterly results briefings as looking for a development partner for the Thacker Pass project in Nevada, so I thought about GM as a good partner, but this amount of money was indeed a surprise. 

 

What GM got in exchange for its USD 650 million investment was 80 000t of lithium carbonate, which is planned to be produced from the aforementioned project. There is a reason why it is planned. Before explaining this, I will do a review of lithium sources.

 

There are three main sources of lithium (four if geothermal is included, but we will omit it in this paper because there is still much unknown about the feasibility of commercial production at high temperatures and pressures).

 

The first is salt lakes. The water is pumped from salt lakes and left to dry in the sun for one to two years in evaporation ponds called ponds built on a vast site the size of a few Tokyo Domes, where it is concentrated to around 6% and refined to mainly produce lithium carbonate (lithium hydroxide can also be produced, but the refining sequence involves producing lithium carbonate before producing lithium hydroxide, and this process is irreversible). Chile and Argentina are the main locations and the main producers are Albemarle and SQM, both long-established producers of lithium, and Livent, a spin-out from chemical manufacturer FMC. These three companies are few major players capable of making battery-grade lithium, which is the key in lithium.

The second is the Lythium pyroxene, commonly known as spodumene. This is very different from the water in salt lakes, which is literally an ore of 'pyroxene'. While salt lakes are maldistributed in Chile, Argentina, the Great Salt Lake in the USA and Qinghai in China, pyroxene widely ranges over the world, with projects being launched in Australia, Canada, the USA, Brazil, Mali, DRC, Zimbabwe and elsewhere. It is important to note, however, that lithium of more than 99.5% battery grade, which is used in car batteries, is not produced in the ore-producing countries, but almost exclusively in China. On the other side, the ore-producing countries do not have the technology to refine lithium. Therefore, although the chart of lithium producing countries below makes Australia appear to be the world's largest lithium producer, it should be noted that China actually produces the combined output of Australia and China, making China the dominant lithium producer. China is overwhelmingly strong in the process of converting ore into lithium hydroxide with low impurities, known as a converter, and has no equal when it comes to refining ore-derived lithium.

 

Salt lakes and ores are the two major proven sources of lithium, but in any case, it is important to note that there are few companies in the world that can produce battery-grade lithium carbonate/lithium hydroxide for use in car batteries. The lack of a market for EVs has been the main reason why no development funds have been invested in salt lakes or mines, and therefore no significant progress has been made in lithium refining technology. 

 

Changes in lithium carbonate market prices USD/kg

 

Lithium still fetched more than USD 70 000 per t (USD 70 per kg) in February 2023, but until around November 2020, there was a time when buyers would have been hard pressed to find even USD 4 500 in spot trade in China.

 

That was only for three years, but the price difference was 15 times. It is a true story that seems to be a lie. I remember that long-term contracts were mostly around USD 12 000 at the time, but there were Japanese companies buying for USD 20 000. The reason Elon Musk said that the more money he prints, the more profitable the lithium business will be is because of this large profit margin. It is difficult to know the actual price in detail because lithium is mostly traded on a relative basis, where transaction prices are not disclosed, but even so there is a price difference of almost six times.

 

to be continued →2. 

 

 

https://www.visualcapitalist.com/visualizing-25-years-of-lithium-production-by-country/

 

Japanese site is here

 

 

****************************

Representative Director, Resource Play Co.

Supervisor, UMC Resources Inc.

   Chimura     (Iruniverse translated by Marcin)

 

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