Is there enough lithium to meet the world’s demand?

Sascha: [00:00:02] From Equity Mates media. This is The Dive. I'm your host, Sascha Kelly. Lithium is a hot commodity, integral to the world's move towards sustainability, an essential component in electric vehicles. Is it unsurprising, then, that demand has skyrocketed?

Audio Clip: [00:00:18] We've come to the vast and remote outback of Western Australia. Here you can find one of the most sought after substances in the world right now. It's an essential ingredient in making batteries. 

Sascha: [00:00:28] And as a result, the geopolitical competition is heating up. German Chancellor Olav Schulz recently flew to Latin America to secure more lithium supplies. Why? Almost half of the global lithium resources are located in the so-called lithium triangle between Argentina, Bolivia and Chile. And for Schulze, this trip wasn't just about boosting supplies to help the likes of the German car industry. It's also about reducing China's lithium dominance. And Schulze, he's not alone in his desperation to secure more lithium. It's Monday, the 20th of February. And today I want to know, is there enough lithium to meet the world's demand? To do this today, I'm joined by my colleague here at Equity Mates. It's Darcy Cordell. Darcy, welcome to The Dive. 

Darcy: [00:01:16] Thanks, Sascha. Exciting. 

Sascha: [00:01:18] It is exciting. Lithium is the key word in our community. Any time we do any content on it in Equity Mates, everyone comments, everyone has opinions. So I'm really excited to get into this today and understand a little bit more about lithium because frankly, I've been a bit behind the times. So, Darcy, I've touched on how lithium is a crucial element in batteries for electric vehicles, but that's not its only use. There's got to be a reason. It's one of the hottest commodities. Can you tell me what else it's in or what it's used for? 

Darcy: [00:01:49] Yeah, lithium is used for all sorts of things. Back in 2015, less than 30% of the total lithium demand was for batteries. So not a whole lot. And the bulk of that demand was split between ceramics and glasses. And then lithium is also used in greases and for other industrial uses, it's even used to treat some mental illnesses such as bipolar disorder. But today's Sascha, the majority of demand for lithium is for batteries. But batteries aren't only in electric vehicles. Virtually all batteries in our phones, laptops and other electronics require lithium. And lithium ion batteries are widely used in other applications as well, from energy storage to air mobility. 

Audio Clip: [00:02:27] We need a good way to store energy for later. And the main option right now is lithium ion batteries.

Sascha: [00:02:32] And by 2030, batteries are expected to account for 95% of total lithium demand, which originally was 30%, as you said, in 2015. So that's a lot of growth in just 15 years. I know Australia is a large lithium producer and judging by the German chancellor's trip, I'm now adding Latin America to that list. Just where does most of the world's lithium come from? 

Darcy: [00:02:55] So the three largest producers of lithium are Australia, Chile and China. And honestly, at the moment there just aren't a lot of other miners of lithium together. Australia, Latin America and China make up over 90% of global lithium production. 

Sascha: [00:03:11] So we've just three regions globally producing lithium. Those producers are super concentrated. So Darcy, reflecting on that statistic, which is talking about the need for lithium in different batteries, just how much is demand expected to increase. 

Darcy: [00:03:27] By 2030, just seven years away? Electric vehicles and other products requiring lithium could account for between 4000 to 4 and a half thousand gigawatt hours of lithium ion demand. Now, that's pretty wordy. 

Sascha: [00:03:40] Yeah, I know. I'm like, I don't really know how much more thousand gigawatt hours of lithium ion is. Does it can you put that in real spec for me? Yeah. 

Darcy: [00:03:49] To put it in perspective, it's more than a 500% increase on the current demand. But even right now there's actually not enough lithium supply to keep up with the current demand. Lithium miners, they're trying to keep up and there are new mines popping up in Western and Eastern Europe and Russia. But as you can see, the demand is just really going to keep increasing. 

Audio Clip: [00:04:08] The European Union has announced plans to effectively ban the sale of petrol and diesel cars by 2035. The move could have a knock on effect for Australia, impacting cars sold here and forcing drivers to buy electric cars.

Sascha: [00:04:21] And when you read reports like Europe declaring it's going to ban petrol cars by 2035, that's only just going to accelerate this story as the demand for electric vehicles and more lithium just goes hand in hand. And we know that there's a global push for net zero emissions by 2050 in certain parts of the world.

Darcy: [00:04:40] And all this pressure to get more lithium is resulting in a massive spike in the price of lithium over the past year. And a bit especially. 

Sascha: [00:04:48] Yeah, prices have jumped by around 550% in just a year. 

Darcy: [00:04:53] Absolutely insane. So the lithium carbonate price is currently sitting around $75,000 per metric. Hahn and lithium hydroxide prices are around $70,000 per metric ton. That's compared with a five year average price of about $14,000 per metric ton. So prices are completely through the roof.

Sascha: [00:05:13] I'm glad you gave me the average Dorsey because I wouldn't have known whether that was expensive or not. So you did say that other mines are trying to come online. Is this supply and demand mismatch story going to settle when they all start producing? 

Darcy: [00:05:27] Well, that's the big question, Sascha. Is there going to be enough lithium to cover the needs of this new electrified world? And at the current rate, I'd say probably not, because lithium supply is expected to expand by about 300% between now and 2030 at a rate of 20% per year. But as I said before, the demand is expected to increase by 500%. So there's still this gap.

Sascha: [00:05:49] Well, that leads us to why the German chancellor, Olav Schulz, visited Latin America. Because Germany doesn't produce its own lithium, but it needs a lot of it. 

Audio Clip: [00:05:58] Securing better access to much sought after raw materials and improving trade relations as a whole. That's the mission that German Chancellor Olaf Scholz has been on during his trip to Argentina and Chile and Brazil, which he is visiting today.

Sascha: [00:06:12] And his visit is also an important geopolitical move. Most of the lithium produced in Latin America is currently sold to China. 

Darcy: [00:06:21] Yeah, that's right. And when there isn't enough supply to match demand, you're going to sell whatever you have to your friends or the people that give you the best offer. And at the moment, Latin America sells their lithium primarily to China. Chile in particular, one of the biggest producers of lithium. There are only two companies that are actually producing lithium, and they send about 90% of their supply to China. So Shultz's trip was to a number of South American countries to try and build a relationship, to then negotiate a better offer than what the Chinese are currently offering. We know Germany has a huge car industry. Think Mercedes, Volkswagen, and it's going to need to secure a lot of lithium to help those companies. 

Sascha: [00:07:01] So here's the question, Darcy, did Schulz have any success? 

Darcy: [00:07:05] Well, during the trip, Germany and Argentina signed a memorandum of understanding that basically says that they will allow Germany to access Argentina's lithium resources. So that was good news. And Chilean President Gabriel Boric said that he was determined to reorganise the lithium industry in his country. So that's an indication that maybe they're willing to move away from this Chinese dominance. And part of Germany's strategy to get Chile on board is to have more of the production process base locally and to help make the extraction and processing less damaging to the environment. So this might be appealing to Chile. 

Sascha: [00:07:41] The global competition for lithium is also why Canada recently banned Chinese mining companies from owning shares in Canadian lithium miners. They openly said it was on, quote, national security grounds, end quote. So, Daisy, as you just outlined before, we've got an expected 500% increase on demand on the horizon and a 300% increase on supply. Huge numbers, but there's still a large gap between both of them. So does it just leads me to ask, do we have a solution to this looming problem? Let's take a break and unpack that in a moment. 

Audio Clip: [00:08:19] We will eliminate the sales of internal combustion engines.

Speaker 7: [00:08:23] But essentially, we're hearing more and more about the electrification of everything, and lithium ion batteries are the key. 

Sascha: [00:08:29] Welcome back to the dive. Before I go any further, you know what I'm going to say? Please fill out our community survey. The link is in the show notes. It won't take you long at all. And it makes the biggest difference to us. If you've heard me talk about this every day so far and you've been going. Yes, Sascha, thanks for asking. Will do that. I've kept forgetting that today's the day. Do it now and you might win $500 or tickets to invest, which is on the 11th of November. Please. It takes 5 minutes of your time and it makes the biggest difference to us. We really appreciate it. But with all that said and done, let's get back to the conversation of today. Darcy, you and I have been talking about the mismatch between the supply of lithium and the ever growing demand. To quote Jeff Goldblum, the great thing about humanity and science is that life usually seems to find a way, a totally bastardised quote and shoehorned it in a little bit. 

Audio Clip: [00:09:22] No, I'm simply saying that life finds a way. 

Sascha: [00:09:26] But I do want to know, are we going to find a solution? Is there something happening or are we exploring new options to solve the fact that we just have a massive gap in how much lithium we actually need? 

Darcy: [00:09:40] I think there are two viable options here. The first is to simply find more supply. 

Sascha: [00:09:45] All right. 

Darcy: [00:09:46] And the second is to improve our technology. So we'll start with the first option. And the good news is more and more lithium deposits are being found around the world. The lithium triangle of Chile, Argentina and Bolivia has an estimated 50 million tons of lithium in the ground. That's honestly probably enough for the whole world, Australia, the US, Canada and China. They've all got massive lithium reserves and in India they just discovered a 5.9 million ton lithium deposit, which immediately pushes it into the world's top five national lithium reserves. So that's the good news. We've found a lot of lithium, but the bad news is that it takes a long time to get it out of the ground. I'll use Tesla as an example. They can build a Gigafactory in about two years. They can have lithium batteries. But the problem is it can take up to ten years to build an operational lithium mine that is ready to sell the supply for these batteries. 

Sascha: [00:10:40] So we've got lots of supply that's there, but we know it's going to take us a lot of time. Is the answer then to getting to these deposits? Technology? 

Darcy: [00:10:49] Yeah, technology and money. The quickest way to increase supply is to ramp up output from the existing mines, the ones that are already producing lithium. Gan Feng Lithium, which is a Chilean producer, said it's using its record profits from the past few years from those 550% price jumps to boost their output and improve efficiency.

Sascha: [00:11:09] But there's also a lot of research and development being done on battery alternatives, isn't there? Darcey Ones that don't require lithium or just as much lithium as they have previously. 

Audio Clip: [00:11:21] And we're seeing other forms of storage that are not chemical or battery based storage. 

Audio Clip: [00:11:28] And each has serious potential. 

Darcy: [00:11:30] Yeah, this is an exciting space. There's a couple of options here that are really in the works. One of those is solid state batteries. They still do require some lithium, but they use less of the other rare earth resources needed in traditional lithium ion batteries. And a solid state battery also doesn't have the risk of exploding or catching on fire. So there's no need to have these safety components within the battery. And that means there's more space to include other materials which can increase the battery capacity. There's also sodium ion batteries, which are emerging as an alternative because they're cheaper, hopefully safer, more sustainable. And they've got performance advantages over lithium ion batteries. They use widely available and inexpensive raw materials, and they could be a massive unlock in meeting the global demand for carbon neutral energy storage solutions. It sounds like these things are already here, but they still do require quite a bit of development before they can become commercially viable. 

Audio Clip: [00:12:27] Which technologies prevail remains to be seen. But one thing is clear for renewables to truly compete with fossil fuels, we need to figure out a better way to store energy. 

Sascha: [00:12:37] So, Darcy, a few ideas in the pipeline, but it still does feel like we're a little way off from a solution by what you said then. And until we get to that point where there is enough supply or technology does advance to a point that that is a solution, I, for one, am expecting to hear a lot more stories of political leaders like the Chancellor of Germany trying to strike deals and competing fiercely with one another for increasingly scarce resources like lithium.

Darcy: [00:13:04] Yeah, I think you're absolutely right. And if the world is going to reach net zero and run almost exclusively on electric vehicles and electrified products, then we're going to need a lot of lithium. 

Sascha: [00:13:15] All right. Well, one to watch and really enjoyed unpacking that with you, too. Darcy, one last thing before you go. FinFest is back for 2023. Get that date in your diary. The 11th of November. Such a fantastic day. We'll all be there. The whole Equity Mates team. If you do want to be the first to find out that the speaker schedules tickets, what's going on? Basically, be on the inside track, then register your interest to keep up to date and access those Early Bird ticket prices. Just go to equitymates.com or I've also launched those things in the show notes below. If it so happens that you're on the run and want to check that out later. If you want to keep the conversation going with the dive, then contact us by email thedive@equitymates.com or hit, follow and subscribe wherever you're listening right this second. And then you're never going to miss an episode. It's just going to drop right there in your podcast player. Darcy, thanks so much for unpacking the hot word of the moment, which is Lithium with me today. 

Darcy: [00:14:12] Thanks, Sascha.

Sascha: [00:14:12] Until next time.