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Lithium is going to change beyond recognition the automotive and refined petroleum product industries, which accounted for USD3.9 trillion and USD2.7 trillion turnover globally in 2016. The rise in energy efficient transportation is also affecting automotive producers, with electric vehicles remaining the hot topic of innovation. However, even though electric vehicles (EV) production soared by 70%, only 550,130 electric vehicles (EV) manufactured globally in 2015, in comparison to a total 90.8 million vehicles produced during the same year. It is also estimated that EV’s effect of reduction of global oil demand by 2022 should be similar in magnitude to the US shale supply revolution in 2015 thus is expected to make a huge impact on the refined petroleum products industry.
This article is a part of a series on global decarbonization efforts and their effects on energy industries, analyzed in the strategy briefing Energy Industries in the Middle of the Green Power Boom
Currently, electric vehicles’ development is limited by production technology of pricy batteries and insufficient input capacity to produce them. Nonetheless, Tesla estimates that it will manage to produce lithium batteries at roughly USD150 per kWh storage capacity by 2020 in comparison to USD300 in 2015. In addition, Tesla is building Gigafactory, a facility that will produce the same quantity of batteries as the whole world did in 2015. Competitors are also expanding their production facilities, thus total lithium batteries are expected to quadruple in 2020, in comparison to 2015. The boom in production of lithium batteries will boost quarrying of stone, sand and clay industry turnover globally, via increased demand for lithium.
To support quick growth of lithium batteries, lithium mining must grow accordingly. However, global lithium output increased by a mere 2.5% in 2015 to 32,500 tonnes resulting in a lithium price increase of 15% to USD7,475 per tonne in 2016. Global lithium mining expansion was limited for political reasons in the countries that hold the largest deposits of the demanded mineral. Moreover, for a prolonged period of time, investors showed little trust in the growth of new automotive and lithium battery technology breakthroughs. However, the industry is turning around with the exploration and investment situation changing in the largest deposit holding countries as well as investors globally.
Latin America’s lithium volume output prospects look the most promising, as lithium is deposited in brines, costing roughly just USD2,000 per tonne to produce. According to the US Geological Survey, Chile owns the largest share with 54% of the known lithium reserves in the world. Yet Chile historically allowed lithium production solely for state-owned companies which contributed to the slow expansion of lithium supply globally. However, recent trends indicate that politicians are becoming more open to discussions about opening the industry to foreign direct investments.
Bolivia is another potentially promising country for lithium supply growth. Though the US Geological Survey estimates that the country has nine million tonnes of lithium reserves, Bolivia states that it is closer to 100 million tonnes. Moreover, President of Bolivia, Evo Morales, announced that the country will invest up to USD1 billion in lithium extraction development over 2016-2019.
Meanwhile, Lithium Americas Corp, a Canada-based mining company, is engaged in developing a lithium mine in Argentina; potentially the third largest deposit in the world. In addition, the production costs are expected to be below USD1,400 per tonne of lithium carbonate. The mine is expected to produce 25,000 tonnes annually of lithium carbonate equivalent in 2019. Once the mine is operational, an additional 25,000 tonnes annual capacity is expected.
In addition, private companies specialising in lithium exploration and development of lithium deposits are opening all over the world. Nevada Energy Metals, a Canada-based exploration company is one of the new small mineral exploration companies, focusing on acquisition of mining rights in many different areas. The company is not only promising its investors high profit margins but also puts new lithium mining projects in developers’ hands quickly. Prospect Resources, an Australian mining company, is developing a high-grade lithium project in Zimbabwe, though just 10% of the area is explored with potential deposit of 18 million tonnes of lithium. European Lithium, an Australia-based exploration and mining company, is developing a lithium deposit in Austria with an expected 3.7 million tonnes of lithium oxide.
In general, there are plenty of lithium deposits around the world, the issue remains the lack of technology to extract the lithium. The story is mirroring that of shale gas, where a sudden technology breakthrough cut the price from USD110 per barrel to USD50 in just four years. We expect that the next shock received by the oil industry will be the rise in price of lithium batteries.
To support the quadruple growth of lithium batteries, lithium quarrying will have to more than double by 2020 and reach about 72,000 tonnes or by 120% in comparison to 2015. The growth will be supported by major expansion in Latin America as well as smaller projects all over the world, including but not limited to the US, Zimbabwe and Austria.