Lithium — which has long been used to power cell phones, laptops and tablets (as well as in applications for other industrial uses) — is on the verge a global demand boom.
The reason?
The emergence of electric vehicles and home batteries charged by solar panels. Additionally, lithium batteries are beginning to be used as backup power sources for businesses and utilities.
However, the supply of lithium cannot be taken for granted.
As batteries become a more prominent and emerging global energy source, demand for lithium is soaring — and we are only at the beginning of the demand curve.
Tesla is planning to produce more lithium-ion batteries in its planned $5 billion Nevada gigafactory than in the entire global marketplace combined.
In fact, that one factory alone will need 15,000 tons of lithium carbonate in just its first year.
Tesla founder Elon Musk says the demand for lithium storage batteries has skyrocketed to the point that an expansion of his gigafactory may have to be considered before it is even built.
According to Credit Suisse, demand for lithium “will actually outstrip supply as we approach the later part of the decade, with demand potentially as high as 125% of total capacity.”
Clearly, that is problematic.
Even before Tesla announced its gigafactory, global lithium consumption had already doubled in the decade before 2012, driven largely by the use of lithium-ion batteries for cell phones and power tools.
Yet, the growing production of electric cars has created even further demand for lithium.
Tesla’s gigafactory is expected to use as much as 17 percent of the existing lithium supply, according to Fortune magazine.
In 2009, total demand for lithium was almost 92,000 metric tons, of which batteries consumed 26 percent, the largest share.
Demand has continually increased in the ensuing years, and it is still growing.
The demand for all lithium chemicals used in batteries is projected to increase by as much as 50% in the near future.
Elon Musk has said he believes that more than 50% of all vehicles sold by 2030 will be fully electric. If his prediction is correct, this will equate to 75 million vehicles requiring nearly 3,000,000 tons of lithium per year.
However, the worldwide production of lithium in 2013 was only around 160,000 tons. Reaching Musk's demand projection would require a nearly 19-fold increase in production.
In other words, we're a long way from meeting that projection.
The problem is that lithium is difficult to find and excavate. The car manufacturer Mitsubishi predicts a worldwide supply crisis as soon as this year if new reserves are not discovered.
Most of the known supply of lithium is in Bolivia, Argentina, Chile, Australia and China. But since China is the largest consumer of lithium, it’s almost certain that all of its supply will be reserved for its own use.
In fact, China controls about 95 percent of the global market for rare earth metals, and it is expected to use most of those resources for its own production.
But lithium is absolutely vital to modern, rechargeable battery technology.
“There are no other materials that could replace lithium, nor are battery systems in development that offer the same or better performance as lithium-ion at a comparable price,” reports Battery University.
About 70 percent of the world’s lithium comes from brine (salt lakes); the remainder is derived from hard rock.
It takes 750 tons of brine, the base of lithium, and 24 months of preparation to get one ton of lithium in Latin America.
However, research institutes are developing technology to draw lithium from seawater. That's encouraging, and it would be game changer if it proves to be feasible.
Yet, it's important to remember that creating energy generally requires enormous amounts of energy. That's always been a conundrum, and a difficult reality.
One of the most promising aspects of lithium is its low cost. A $10,000 battery for a plug-in hybrid contains less than $100 worth of lithium.
The conclusion?
The demand for lithium is quickly outpacing supplies, and a shortage could ensue as soon as this year.
Given the math and the timeline behind the creation of lithium (750 tons of brine produces just one ton of lithium after 24 months), a shortage problem could escalate rather quickly.
But lithium is rather cheap, while the cost of crude oil is not. Moreover, crude is a finite resource and is therefore guaranteed to increase in cost over time.
Any hope of meeting the absolutely massive global demand for lithium in the years ahead (again, Elon Musk projects a demand of nearly 3 million tons per year by 2030), is wholly dependent on the development of technology allowing for its extraction from seawater.
In short, such a technology is a sort of scientific holy grail.
What about Bacanora and Rare Earth Minerals plc and the Mexican Sonora and Australian Yangibana lithium finds. Especially mexico which is surface mined clay deposits. The Saudi oil of lithium.
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