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A Future Scenario for Lithium - Alpcan Efe Gencer

The rise in demand for Electric Vehicles(EV’s) combined with the boom in demand for Lithium-Ion batteries in the usage of overall electrical equipment in early-to-mid 2010s created the first near supply shortage of Lithium in the global markets. The price of Lithium hit 156$ in January of 2018 and worried many about the potential reliability of Lithium suppliers. However, the markets were quick in responding, and the number/size of production facilities being brought into operational status increased incrementally in a short time. The prices fell back to low 100$’s by 2019.

The world’s estimated Lithium resources are thought to be around 39 Mio Tons, with only 1/3rd of that number being economically feasible to recover. 87% of the recoverable amount is located within salty/brine lakes, and 13% is believed to be in hard rock mineral deposits. The cost of recovering Lithium from salt lakes is around half that of hard rock operations. The boost in the production from these lakes helped the first response to the Lithium shortage in 2018.

The expansion of production facilities (gigafactories) of EV producers should keep the expansion plans of suppliers going, and the market price of Lithium can potentially decrease by mid-2020s and create a sizeable spare production capacity. If the case of peak oil occurring within this decade holds, the improvements in EV production methods can cause the producers to ramp up the production significantly by 2030 based on their competitive edge in the market against fossil fuel-powered vehicle producers. These developments, however, as good as they are for the environment, can bring along new problems. According to Bloomberg NEF Electric Vehicle Outlook, the EV annual sales that were 1.1 Mio in 2017 can grow to 11 Mio by 2025 and from there with a substantial increase to 30 Mio by 2030. The global suppliers have an immense problem of making up for the new demand from the producers. The global Lithium demand can increase triple-fold by 2030 from the 2017 numbers. How would the world react to this recurring, but on a grander scale, crisis?

The believers of markets might want to let the price demand mechanism sort out this issue. The problem with this approach is that EV’s, as much of commercial activity as they are, also serve the grand purpose of lowering the overall GHG Emissions and contributing to the less towards climate change when compared to fossil fuel-powered vehicles. In a runaway price scenario, the cost of producing an EV would reach such high levels that production facilities would seize operations and potentially leave the stage back to internal combustion powered vehicles until prices fall back to reasonable levels again. That is not a favorable and likely scenario.

The technocrat decision-makers, on the other hand, can offer a solution as to start researching new and alternative energy sources for powering the EV’s and potentially reverting the past 15-20 years of development in the field. A leading candidate for this proposal would be to build on the already advancing technology of hydrogen. The implications of this plan are not viable in real-world terms as the time to come up with these new methods and switch over would be too long and too costly. The idea could be scrapped from the real-world application, but the theoretical practice of the methods can be developed to serve as an academic reference for future developments.

The corporations’ viewpoint on the subject can be to focus on the demand and supply dynamics. Following 2025, %50 of global EV demand is forecasted to be situated in China. China also houses 1/14 of the worldwide Lithium reserves. The development of these deposits and the construction of EV factories in China can bring significant supply chain benefits to the companies and lower the overall cost of Lithium by bringing closer the producers and consumers. The effects of this plan can have tangible outcomes but are unlikely to solve the whole problem of global supply.

That is not the first time a commodity has been scarce in human history. The hefty increase in oil prices in mid-to-late 2000’s encouraged drilling many companies to explore and experiment with new technological developments in their field. The result? With the application of hydraulic fracking, the shale gas and oil deposits that were previously named as economically unfeasible became viable again, and the global oil and gas prices decreased within months following the supply abundance of the shale boom. If we look back at the statistics mentioned above given in the paper, 2/3s of the global Lithium reserves are still deemed economically unfeasible as well. Given a possible spike in lithium prices and the shortcomings of the supply side in response to booming demand, miners and producers will likely spend remarkably large sums on developing new methods to extract the 2/3s of unfeasible lithium deposits. The outcome of the application of these non-conventional methods will probably bring the supply upward and the prices downward.

The process will likely begin as soon as reports or material signs about shortcomings emerge within the industry. As is usual, the most reasonable and practical solution was within the roots of the problem itself. There is enough Lithium for long years of Lithium-Ion battery production but is only a matter of the market, technology, and academia coming together to solve the problem. As the EV sector didn’t develop over internal combustion engines overnight, so won’t the lithium production industry as they will experiment with new production methods throughout this cycle of market and bring the supply and demand balance of the market to once again manageable levels, maybe even with considerable spare capacity to offset against possible demand booms and supply shocks. However, as it is with everything, time will tell how it will all play out.


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