2,850,000 billion and 20 million: two numbers that can enlighten us all about the looming lithium shortage. That first is mine and therefore wrong – but it’s useful still.
Scientists think they know the rough composition of the crust of the Earth, the lithosphere. The percentage of each element contained is the Clarke Number. That times the known weight is how much is out there of each element. For lithium, that gives us 2,850,000 billion tonnes.
Of course, this is ludicrous as a number detailing how much lithium can actually use – it assumes we leave nowhere for us to stand, for a start. But it does give that outer, outer bound. Much of the amount of any – and every – element is highly dispersed, fractions of a percentage point spread throughout nearly everything.
It’s also true that we happily mine gold at one gram per tonne of rock – that’s 1 part per million. If we’re prepared to pay the price of gold for an element, we can get rather a lot of it. The Red Sea is 3 ppm lithium – and there are those who claim to be able to mine that right now. It is indeed physically possible to do so; it’s the claim that it would make economic sense to do so that currently raises eyebrows.
The other number – 20 million tonnes – is Tesla’s estimate, from Master Plan 3, of how much lithium we need to electrify the world: 20 percent of the mineral resources as listed by the U.S. Geological Survey in 2023, some 100 million tonnes. We can back calculate that at 10 kilograms of lithium per car battery, giving us 2 billion cars. We’re going to recycle such batteries, so that’s the amount necessary in the system, not in annual addition to it.
This estimate is close enough to be able to discuss further. There is no shortage at all of the base material – the lithium, that is.
Note also what those numbers prove. Mineral resources are nothing – nothing at all – to do with what is available. They’re actually combined from what mining companies claim they’ve already found and are working on delineating and getting financed. The estimates of available resources, then, are not referring to what can be found, but what is already being worked upon. Logically, that means that there’s a lot more out there to find.
And there is. The lithium price has risen by 10 times in the last few years. There are 200 listed would-be lithium mining companies that I know of. I am not omniscient, so there are more. And more lithium is being found too. That 2023 resources number is up by 7 million from the 2022 one – we’ve found nearly half of the total demand to electrify everything in just one year. Greed is a powerful motivator.
The world isn’t just finding more of the same old two mineral sources of lithium, either: the salt flats of Latin America or the granite-hosted mineral spodumene. It’s also been shown that geothermal power station waters in the Salton Sea, the Upper Rhine, can have their lithium extracted economically. So can the waste streams from desalination plants. Sea water contains lithium. If you make fresh water from sea water then you must have some saltier than normal water left over, and lithium can be extracted from that.
That 1,000 percent rise in lithium prices means not just more exploration for the same old interesting rocks, but more exploration of all the other sources from which lithium might usefully be extracted. That’s even before we get to the idea of clay-based deposits, like the Thacker Pass mine in the United States, which is, by the standards of this industry, a potentially monster-sized producer. It would involve a different chemistry and different production method, but this should be doable.
This flood of new lithium production has also driven the lithium price down 75 percent again in just the last nine months. That is the one true proof that there is no lithium shortage – yet.
But the lithium industry does have one trick up its sleeve that complicates the laissez-faire, free-market approach.
There’s a very strong tendency toward monopoly via vertical integration. This is most apparent in those hard rock, spodumene mines. The product from the mine itself is usually a 6 percent concentrate. This then has to go to a processing plant to be turned into the actual salts – chemicals – that battery makers want to use. But the processing plant has an economic size much greater than any one mine can supply. This means that no one mine has its own plant and never will. It also means that the processing plant might have supply from five or 10 different mines. Each mine wants a regular customer; the plant definitely needs continuity of supply from many mines.
The economic pressures here are thus that the two sets sign “offtake” contracts. The plant definitely will take the production; the mine will definitely sell to the specific plant. That then leads to a higher level of interdependence. The usual source of capital to build the mine (actually, the concentration plant at it) is the processing plant owner, the person who is going to buy the concentrate. The two are linked by that offtake contract and also cross-shareholdings.
Thus we get vertical integration, with the processors owning substantial portions of many mines and restrictive contracts on their output too. As it happens, most of the processors are Chinese; this is the source of their lock on the industry. This monopolistic – there are several such Chinese companies, so “oligopolistic” is perhaps a better word – position is redoubled as those same companies buy into the salt brine operations and even the clays. Thacker Pass in the United States has seen the controversial involvement of Ganfeng, a Chinese lithium company.
This is where any strategic problem comes in. There is plenty of lithium out there and innumerable people willing to mine it; in the raw material sense there is no issue. But the processing capability is terribly concentrated and nationally so, under one legal jurisdiction – to the extent that doesn’t mean under one government.
In that sense, there might well be a strategic and commercial issue that governments want to address. A major and non-China-based processing plant, even a series of them, might be one of those things tax money could be usefully spent upon. But so far, we haven’t seen much interest in that. Instead, current investment looks more intent on boosting the wrong side of the equation: the supply of raw materials.
The current lithium subsidy discussion in the United States centers on whether Thacker Pass should be subsidized by an easy federal loan. That mine would produce raw lithium inside the United States, for sure, but is in partnership with the Chinese company Ganfeng, and will almost certainly rely upon that company for processing – which isn’t really the point, is it? Actually, it sounds more like increasing China’s hold on the industry through that vertical integration than anything else.
The lithium industry is one of those times when clever government intervention might be useful. Sadly, it’s also an example of the fact that we don’t have clever government, which is exactly why such interventions are so often problematic to begin with.