Tesla spurs demand for lithium chemicals

Tesla Motors is hiring more construction workers in a bid to move up the opening of its so-called Gigafactory outside of Sparks, Nev., where the electric vehicle maker plans to produce lithium-ion batteries beginning next year. The factory’s projected output has already tightened demand for lithium chemicals and inspired expansions at several chemical firms.

By 2020, Tesla’s claim on the world’s lithium supply will have grown to 14%, up from about 3% today, according to Robert Baylis, manager of minor metals research at Roskill Information Services. Adding to lithium demand is a push by China to build more electric vehicles and buses.

Citing the signing of a multiyear supply agreement with a “major manufacturer of electric vehicles,” the chemical maker FMC recently announced that it will accelerate an ongoing lithium hydroxide expansion. Baylis says he believes that manufacturer is Tesla.

“Tesla is starting to lock in material supply for the Gigafactory,” he says, “although it will need more than just FMC’s expansion commitment.” At peak capacity, the Gigafactory will require 35,000 metric tons per year of lithium chemicals, as measured in lithium carbonate equivalents.

Meanwhile, Albemarle, which acquired the lithium chemicals maker Rockwood Holdings in 2015, will expand output in Chile by 2017. In this year’s first quarter, Albemarle saw demand and higher prices for battery-grade lithium boost earnings for its lithium business by 26% compared with last year. The percentage of its customers that signed long-term supply contracts for lithium carbonate and hydroxide increased 60%.

The lion’s share of lithium-containing battery chemicals come from China. Lithium carbonate and hydroxide are used in cathodes, lithium metal is used in some anodes, and lithium salts are used in electrolytes. Lithium chemicals are also used in glass, ceramics, and lubricants.

In the “lithium triangle” straddling Argentina, Bolivia, and Chile, demand for lithium has caused investment in new mining operations to expand beyond the brines of Chile’s Atacama Desert to nearby Argentina, where FMC already has facilities in the Salar del Hombre Muerto. Chile’s SQM, along with newcomers such as Lithium X and Lithium Americas, is establishing facilities in northwestern Argentina.