Challenging China’s dominance in the lithium market

Cone-shaped, cream-colored mountains of mine tailings scooped out of quarries puncture the skyline around Roche, in the county of Cornwall in southwest England. It is here that the start-up company British Lithium hopes to open Europe’s first lithium mine and lithium-refining plant.

“We want to be in commercial production in 3 years,” says CEO Andrew Smith, a mining engineer. He spent weekends during the COVID-19 lockdown building a pilot plant to extract lithium from mica in the local granite. The plant is now running, and the firm says test results show that the process performs well economically and environmentally. British Lithium has already begun sending samples of 99.9%-pure lithium carbonate to lithium-ion battery makers and has started discussions with producers of electric vehicles (EVs), Smith says.

The Cornwall-based company is one of more than a dozen across Europe aiming to mine and refine lithium. Companies in North America, as well as other countries around the world, are also working to increase lithium mining and processing.

Batteries require lithium in the form of either lithium hydroxide or lithium carbonate depending on the chemical composition of the cathode. Demand for EVs is growing so quickly that established lithium-mining companies such as Albemarle and SQM can’t keep up. Even with new companies joining the fray, a lithium supply shortage could be looming.

An additional issue is that China controls almost 60% of the world’s capacity for processing raw lithium products into battery-grade chemicals. Some Western countries are concerned that if lithium supplies fall short, Chinese companies will meet the needs of their own rapidly growing EV market first. Meanwhile, Chinese firms continue to invest in lithium mining and processing and lithium-ion battery production around the world. The race for countries to establish a secure, independent supply of lithium is on.

“There could be a fourfold increase in demand for lithium by 2030,” says Bernd Elser, global chemical lead at the management consulting firm Accenture. That would take demand to about 2.4 million metric tons (t) per year of lithium carbonate equivalent, the unit the industry uses to measure lithium-chemical output.

Companies currently recover much of the world’s lithium from lithium brines—such as those in Chile—and from spodumene rocks—such as those in Australia. “However, opening new mines or expanding existing ones can take several years or more and is being outpaced by the anticipated surge in demand,” Elser says.

Analysts at the investment firm Jefferies Group forecast that global lithium production will increase 34% in 2023, 14% in 2024, and 8% in 2025. But even with these increases, there will be a 37% shortfall in lithium supply by 2030, according to a recent study conducted by KU Leuven and commissioned by Eurometaux, a European industry association for nonferrous metal producers and recyclers. Demand for rare earth metals—again controlled mostly by Chinese firms—is also set to grow rapidly, the study found.

With a tightening supply, many industry watchers expect lithium’s price to climb through the decade. The contract price for lithium has more than doubled in the past year, to above $25,000 per metric ton of battery-grade lithium hydroxide. The spot price for the same material on the London Metal Exchange hit $80,000 in October. Analysts at Berenberg forecast that the contract price will be about $36,000 per metric ton in 2023 and $26,500 in 2024.

The price’s rapid increase is due to the global shortage of lithium, British Lithium’s Smith says. As uncertainty around lithium supply builds, governments around the world have increased funding and policy support for domestic lithium mining and processing as well as the recycling of lithium-ion batteries.

In June, the US, Australia, Canada, Japan, South Korea, and many European countries established the Minerals Security Partnership to secure a non-Chinese supply of critical minerals, including lithium. In August, through the Inflation Reduction Act, the US government pledged about $370 billion for climate, clean energy, and environmental justice projects, including domestic lithium mining and refining.

“We have to outcompete China and in the world, and make these technologies here in the United States—not have to import them,” US president Joe Biden said while promoting the act.

The European Union is following suit. In September, European Commission president Ursula von der Leyen announced the European Critical Raw Materials Act for lithium, rare earth metals, and more. “We will identify strategic projects all along the supply chain, from extraction to refining, from processing to recycling,” she said as part of her annual State of the Union address.

“The not-so-good news is—one country dominates the market. So we have to avoid falling into the same dependency as with oil and gas,” von der Leyen said. The references to China and Russia were clear.

North American growth

Analysts predict that a substantial share of the world’s future non-Chinese supply of lithium and lithium chemicals will come from North America. The region accounts for nearly a quarter of the money being invested in exploration for new sources of lithium globally, and “some forecasts point to its share of global mine production increasing from less than 1% today to potentially north of 10% within 6 years,” says Sean Keenan, global natural resources research lead for Accenture. Production will also increase significantly in South America and Australia, he says.

Ken Hoffman, cohead of EV battery material research for the consulting firm McKinsey, takes a similar position. Lithium tends to occur at relatively high concentrations in dead seas­—former bodies of water that have evaporated, leaving high concentrations of minerals—and the US has plenty of them, he says.

Hoffman is optimistic that new technologies for extracting and refining lithium will greatly boost supply. A raft of direct-​lithium-extraction (DLE) technologies, which precipitate lithium out of brine using filters, membranes, or ceramic beads, are being tested in pilot facilities around the world. Direct-lithium-to-product technologies, which involve the recovery of lithium hydroxide or carbonate from lithium-​containing solutions without pretreatment steps, are also being tested, Hoffman says.

Among those developing direct-​lithium-​to-product approaches is the US material separation company IBC Advanced Technologies, which has been testing its SuperLig molecular recognition technology in the Salar de Maricunga, Chile.

Arguably, the company best placed to increase US lithium production is Albemarle, a US firm that is the world’s largest lithium producer. The company is substantially expanding production at its brine-based lithium site in Chile and at two huge rock mines in Australia.

In June, Albemarle inaugurated a lithium-​processing facility near Antofagasta, Chile, as part of a $500 million investment that will enable the firm to double production at the site, to more than 80,000 t per year of battery-grade lithium carbonate.

Albemarle also operates the only major lithium production site in the US, a brine evaporation complex in Silver Peak, Nevada. The company plans to spend up to $50 million to double production there by 2025, to about 7,500 t per year. It also plans to build a plant for converting lithium ore into lithium hydroxide in the southeastern US and to reopen a hard-rock mine in North Carolina.

“Pricing has very much gone up. That helps us with the long-term investments that we need to make,” says Glen Merfeld, Albemarle’s chief technology officer for lithium. “By 2030, we’re forecasting in our supply-versus-demand models a deficit of lithium.”

Technology improvements will play a key role in Albemarle’s capacity expansions around the world. “There are opportunities to get more efficiency and productivity out of our existing resources and conversion assets,” Merfeld says.

He says the firm is open minded about the technologies, including various forms of DLE, that it might deploy. The company’s goal is to tailor an absorption surface or a solvent so that it selectively grabs lithium and nothing else, Merfeld says. Over 250 companies and research institutions are working on such technologies, and up to 10 of them may have exciting potential for Albemarle, he says.

By the end of 2023, Albemarle plans to deploy a new processing technology that could yield as much as 15% more lithium from brine. “It’s like discovering a whole new resource,” Merfeld says. Albemarle is also working on brine and ore processes that consume less water, since water availability can be controversial in lithium-mining countries such as Chile.

While the US government is encouraging US companies to mine and process lithium within the country, Albemarle’s next lithium project will be in China’s Sichuan Province, where in July the company broke ground on a facility for converting lithium ore into battery-grade lithium hydroxide. The facility will initially produce up to 50,000 t per year of lithium hydroxide, enough to power more than 1.5 million EVs, Albemarle says.

Global production of lithium is going to be the most efficient way to meet the market’s needs, Merfeld says when asked about China’s dominant position in the lithium supply chain.

Albemarle is also investing heavily to increase production at Greenbushes, Australia’s largest lithium mine, in which it has a 49% stake. The Chinese firm Tianqi Lithium owns the other 51%.

Until recently, Australia’s main role in the lithium supply chain was to mine lithium-rich material and ship it for processing around the world, especially to China, which has substantial refining capacity. But that changed in May with the opening of Australia’s first processing plant for battery-grade lithium hydroxide, near Kwinana, not far from the Greenbushes mine.

Although the project is on Australian soil, it is 51% owned by Tianqi. The other partner is the Australian mining firm IGO. Costing $680 million, the plant has a capacity to produce 24,000 t per year of the battery raw material. Plans are already underway to substantially expand processing capacity.

The lithium contenders

Meanwhile, several smaller companies are lining up lithium-mining projects in the US. For example, in September, Piedmont Lithium announced plans to start producing 30,000 t per year of lithium hydroxide in Etowah, Tennessee, by 2025. With another facility planned in North Carolina, Piedmont hopes to be producing a total of 60,000 t of the battery ingredient per year by 2026.

Piedmont’s Tennessee facility, which will cost about $600 mill​ion to build, will be among the first to use a process that eliminates the need for acid leaching of lithium ore and the generation of the corresponding sodium sulfate waste, the company says. The US firm plans to source its lithium from spodumene ore mined in Gaston County, North Carolina, as well as overseas mines in which it has an ownership stake, including one in Ghana.

“As global automotive companies electrify their fleets, we expect them to increasingly seek ex-China sources of lithium supply, and North Carolina is ideally-positioned to benefit given its proximity to major auto markets in the US and Europe,” Keith D. Phillips, Piedmont’s CEO, says in a 2020 press release.

Other US projects include one in Arkansas, where Standard Lithium plans to extract lithium from waste brine. The waste will come from a bromine facility run by the chemical company Lanxess. Standard Lithium expects to produce up to 6,000 t per year of battery-grade lithium carbonate at the Arkansas plant using DLE technology. The process eliminates the use of evaporation ponds, reduces processing time from months to hours, and greatly increases the recovery of lithium, Standard Lithium says. Lanxess has an option to buy a stake of up to 49% in the project.

Meanwhile, the US Department of Energy is encouraging low-carbon projects that extract lithium from hot brines while simultaneously generating power. Coupling geothermal energy with lithium extraction should enable lithium production with lower energy costs and a significantly reduced carbon footprint. “As lithium demand continues to grow, geothermal energy may soon play a greater role in our lives and in the green economy,” the department says in an announcement from the Geothermal Technologies Office.

Controlled Thermal Resources, which already generates electricity from geothermal heat in California’s Salton Sea, is building a geothermal plant in the same region that will also extract lithium. General Motors, an investor in the project, has secured rights to the 20,000 t per year of battery-grade lithium hydroxide that Controlled Thermal Resources plans to produce.

Tesla, the big battery and EV producer, is looking to make at least some of the lithium it needs. In August, the firm applied for permission to build a plant in Robstown, Texas, that will process lithium-rich material into battery-grade lithium hydroxide. Tesla is also considering locating the plant in Louisiana. The company says it will deploy a technology developed in-house that uses fewer reagents than standard processes while also generating useful by-products.

Uphill battle in Europe

While the US has the potential to produce most of the lithium it needs by 2030, analysts expect Europe to meet at most 25–50% of its demand for lithium in the coming years. Europe has zero lithium-mining or lithium-processing capacity and one of the world’s fastest-growing EV markets. There is “a very high level of uncertainty” associated with many of Europe’s proposed lithium-mining projects, says Chris Heron, communications director for Eurometaux. Local opposition is causing delays, the economics can be challenging, and untested technologies need to be demonstrated at scale, he says.

Major European lithium projects that have been delayed or rejected by planning authorities include the mining giant Rio Tinto’s proposed mine in Serbia’s Jadar region. Permits were revoked earlier this year after residents protested about the project’s potential environmental impact. As proposed, the project would have produced up to 58,000 t of battery-grade lithium carbonate per year.

In Portugal, the mining firm Savannah Resources has also had its plans for a major lithium mine thwarted. The local government recently stalled project proceedings so that landowners in the area could have greater input into plans for the mine.

While in theory Europe could supply a meaningful portion of its needed lithium production and processing, this is unlikely to happen without far more encouragement of local production, says Anton du Plessis, CEO of Zinnwald Lithium, which wants to mine for lithium in Germany. “It is a challenge for all European mining projects,” he says.

Nevertheless, momentum to establish a complete lithium supply chain is building in Germany, Europe’s largest auto producer. Zinnwald Lithium is seeking to make 12,000 t per year of battery-grade lithium hydroxide from ore mined 35 km south of Dresden. The company also plans to get potassium sulfate fertilizer and calcium carbonate from the same facility. It aims to begin commercial production by the end of 2026.

Zinnwald is investigating magnetic separating and laser sorting to make its lithium production process more efficient. The firm plans to mine lithium-rich rock and extract it from access tunnels dug during earlier mining forays in the area. In the same way that EVs can generate electricity when braking, Zinnwald expects to power generators with kinetic energy created as it lowers ore for the extraction step.

“This will make lithium from Zinnwald attractive to automakers, which in general are very focused on where the material in their product is coming from and its CO₂ footprint,” du Plessis says.

Zinnwald is not, however, the all-​European company that the European Commission has in mind. China’s Ganfeng Lithium Group owns 8.7% of the firm. Du Plessis does not consider the Chinese shareholding to be an issue. “The Zinnwald project is focused on becoming a supplier to the European market,” he says.

Vulcan Energy Resources, which also plans to produce lithium in Germany, intends to go one better environmentally by producing carbon-neutral lithium from a combined lithium brine and geothermal energy process. Rather than evaporate brine in ponds, Vulcan will use an adsorbent-type DLE technology to extract lithium. Vulcan’s negligible distance to markets in Europe is both a cost and a carbon advantage, the company says.

For each 1 t of lithium hydroxide produced, Vulcan’s process will consume 80 m³ of water and generate zero carbon dioxide, the company estimates. In contrast, companies in China would consume 170 m³ of water and emit about 15 t of CO₂ to produce 1 t of lithium hydroxide. Extracting and refining lithium from brine evaporation ponds in places such as Chile consumes 469 m³ of water and emits 5 t of CO₂, Vulcan says.

Vulcan estimates that its production cost of $3,140 per metric ton of lithium hydroxide will be about half that of firms using rock mining or evaporation pond techniques. The company has been awarded eight exploration licenses in Germany’s upper Rhine valley and signed on the big carmaker Stellantis as an investor.

Companies seeking to mine lithium in the UK hope to ease their way through the regulatory approval system partly by demonstrating that they can minimize their environmental footprint.

British Lithium’s Mi-Sep process for extracting lithium from mica in granite will cut the volume of waste needing subsequent treatment by 80% and will require very little water, even compared with other rock-mining processes, Smith, the CEO, says.

The UK firm remained tight lipped about the details of its technology, which it is testing in the $3.4 million pilot plant. But it has filed three patents. One is for a wet separation process, which involves passing a current through a slurry to separate out nonlithium particles. The second is for the recovery and reuse of sulfite reagents from brines derived from lithium mica. And the third is for extracting lithium from mica by calcination without pH adjustment.

Processing ore into battery-grade lithium carbonate is “like baking a cake; you have got to get all the settings and timing just so,” Smith says. Costs will be among the best of the bottom 25%, he says. “We will never beat brines in South America, but we will compete very well with established spodumene-rock players.” British Lithium’s goal is to start producing 20,000 t per year of lithium carbonate, enough to meet about one-third of the UK’s near-term requirements.

A few miles down the road from British Lithium, Cornish Lithium is evaluating a number of techniques for extracting lithium from granite, including the use of DLE in association with hot brines and the simultaneous generation of geothermal energy. Two more companies are planning major lithium plants in the Tees valley, in the north of England, that could process lithium-rich material from mines in the UK and beyond.

Even if some projects across the lithium value chain are delayed, McKinsey’s Hoffman is optimistic that supply will keep up with global demand. “The massive increase that already occurred has been met,” he says. With plenty of lithium widely distributed around the world, “it’s really a capital expenditure problem,” he says. Hoffman is also confident that next-generation extraction technologies will enable more lithium to be processed far more efficiently.

Competing on sustainability

With or without locally produced lithium, European producers of battery cathode materials are seeking to outdo their Chinese competitors by positioning themselves as having the smallest environmental footprint. Cathodes are the component of a lithium-ion battery that requires the most lithium.

The Belgian company Umicore recently announced that starting in 2025, it will power its cathode material plant in Kokkola, Finland, solely with wind energy. The firm has also opened a carbon-neutral plant for cathode materials in Nysa, Poland. Chinese firms, in contrast, tend to rely on electricity generated by burning coal.

In late September, Umicore announced its biggest strategic move yet in batteries: the formation of a $3 billion European joint venture with Volkswagen Group’s battery division, PowerCo, to make cathode materials and their precursors. The partners plan to produce enough material annually for 2.2 million EVs, PowerCo chairman Thomas Schmall says in a press release.

The environmental performance of BASF, the big German chemical company that is Europe’s other major cathode material supplier, is also attracting attention. “BASF’s strategy to cut total emissions against high-impact producers by about 80% serves as a competitive advantage,” Jefferies says in a recent note to clients. BASF is on track to have a 10% global market share by 2030 and be the first global cathode material producer to have a meaningful manufacturing presence in every major industrial region of the world, Jefferies adds.

Companies like BASF and Umicore are also developing technologies for the zero-waste recycling of lithium and other materials from used batteries. Recycling could play a major role in the lithium supply chain, especially in Europe, where opportunities to mine the element are limited. After 2030, recycling could provide 70% of Europe’s lithium supply needs, according to the study by KU Leuven.

“For Umicore, battery recycling is key,” says Hachi Yagi, an associate scientist at the company. “It’s very important for the future. We need to invest in R&D but also new plants to have the capability to recycle the batteries in the future.”

Recycling old EV batteries has hardly begun, yet keeping battery waste in Europe is already a concern. “There’s a big risk that the scrap we generate will just be shipped elsewhere,” Eurometaux’s Heron says.

There is healthy demand for “black mass”—the mixture of metals recovered from dismantled EV batteries—in South Korea and China. The South Korean battery recycling firms SungEel HiTech and Sebit Chem successfully launched on the South Korean stock exchange during the summer. “The message to policy makers is not to be naive,” Heron says.

Meanwhile, major Chinese battery companies continue to invest heavily around the world. Contemporary Amperex Technology Co. Limited, the world’s largest lithium-ion battery maker, is building a major EV battery plant in Germany and recently disclosed plans to build what could be Europe’s largest lithium-ion EV battery plant, in Hungary. Costing $7.5 billion, it will have an annual capacity to produce enough batteries to power more than 200,000 EVs.

Chinese firms are clearly unmatched in lithium-ion battery chemistry at present, but technological breakthroughs could give companies outside China a bigger share of the future lithium value chain, McKinsey’s Hoffman says.

On the other hand, a surge in the adoption of EVs in China could lead to tension over where Chinese lithium-chemical producers will direct their product, should supplies run short. “The car industry in China is growing rapidly. They will also move to EV production,” Accenture’s Elser says. “You wonder whether they can ramp up their lithium production capacity” to keep up with demand, he adds.

While Elser acknowledges the possibility of a worst-case scenario, he also suggests that lithium production outside China could grow fast enough to meet demand and that China’s dominant market position could be diluted. The global supply of lithium—and with it, the ability of many countries to transition to a more sustainable form of transportation—hangs in the balance.