FT Rethink

    Batteries under threat: supply crunch looms for lithium

    To reach net-zero targets in the coming decades, our transport systems must change – the loud rumble of cars powered by petrol and diesel must be replaced by the low hum of electric vehicles (EVs) on our roads. But while sales of EVs have soared, and 30 governments have said they will stop the sale of new petrol and diesel cars by 20401 or before, there is one very significant problem – the growing demand for lithium.

    With projections that we are soon to see shortages in the supply of the ‘white gold’ that is integral to battery production, concern has been raised that targets for EV roll-out may be jeopardised. With supply dependent on just a handful of nations, and protests continuing over the environmental impact of lithium extraction, the race is on to find alternative sources of this precious resource, or even alternative metals altogether.

    Along with nickel and cobalt, lithium is a key component in the batteries found in most of today’s electronic devices…

    Read also: Is a sustainable electronics industry possible?


    Why lithium?

    Along with nickel and cobalt, lithium is a key component in the batteries found in most of today’s electronic devices, where it is used to make the cathodes that transport electric current from batteries to the devices they are powering. Until recently, the lion’s share of global lithium production was used in the manufacture of batteries for mobile phones and laptops, however, with a battery pack for a single electric car containing around 50kg of lithium carbonate, EVs have now taken top spot2.

    Rising demand for EVs has led to sharp price hikes – over the last two years, battery-grade lithium carbonate prices have increased10-fold. In 2021, enough lithium was mined to make around 11 million batteries, but in order to reach net-zero targets by 2050, it is estimated that the world will need a cumulative total of 2 billion battery packs for EVs3 and hybrid vehicles. While estimates put worldwide reserves at enough to produce 2.5 billion, in theory enough to fulfil demand, lithium is also needed for batteries in planes, trains, bikes and consumer goods.

    Estimates suggest that across the five years from 2020 to 2025, demand for lithium will treble4. The International Energy Agency (IEA) is warning of potential shortages in just two years5, leaving many prospective EV buyers, who want to play their part in getting to net zero, at risk of missing out.

    Read also: From hot sand to liquid air – 5 early stages energy storage solutions that could help underpin the electric economy

    To add to the supply constraints, 75% of worldwide production capacity is held by just five companies

    A question of supply– and environmental impact

    While lithium deposits are widespread, production is mostly concentrated in Australia, China, Argentina and Chile, which has the largest known reserves. New deposits have been found in the US, Portugal, Germany and Mexico, among others, but, despite this, production remains concentrated in the ‘big four’.

    Although Australia dominates production, accounting for more extraction than all the rest combined, China has a stranglehold on the supply chain, with 60% of global lithium processing refining, the process in which raw lithium is turned into battery-ready material, taking place in the country. Over the last decade, Chinese firms have also bought around USD 5.6 billion worth of lithium assets outside of China.6 To add to the supply constraints, 75% of worldwide production capacity is held by just five companies.

    In many places, production is complicated by the environmental impact of lithium extraction7. In Latin America, where lithium is mostly extracted from brines through pond evaporation, the process is highly water-intensive requiring 2.2 million litres of water for the production of just 1 tonne of lithium8. In Chile and Argentina, lithium is mined from beneath salt flats in some of the driest places on earth9, while the San Cristóbal mine in Bolivia is said to use 50,000 litres of water every day10. In Argentina, there are moves to limit ambitious plans for exploration11 amid concerns over the rights of indigenous people and the ecosystems in which they live. In Australia lithium is extracted through conventional mining as this is found in hard rock. This type of lithium extraction which has three times more carbon intensity than the lithium extracted through evaporation12.

    In a supply chain lacking in resilience, even minor upsets to the geopolitical order could imperil essential lithium exports

    The industry is also beset with practical difficulties. The bar to entry is high for lithium miners and processors – just a small number of companies have the means and expertise needed, and it is unclear how long it will take new entrants to come online. Albemarle, the biggest lithium producer in the world, has stalled plans to extract lithium in Europe13 after it could not find an appropriate site. Such are the environmental concerns and extraction difficulties that even the discovery of new deposits is no guarantee of near-term production increase.

    Then there are the macro threats from natural disasters or geopolitical conflicts. In a supply chain lacking in resilience, even minor upsets to the geopolitical order could imperil essential lithium exports.

    Read also: Cleared for takeoff: How sustainable aviation fuels can put the industry on course for net zero

    Finding an alternative

    Economies of scale and technological innovations have led to dramatic cost declines in battery manufacture – between 2010 and 2020 the price of lithium-ion batteries fell by 88%. With the price and accessibility of lithium threatening to reverse this trend, it is now hoped that innovation will help resolve supply concerns.

    Emerging technologies offer some hope. Direct lithium extraction14, where lithium is extracted from brine without evaporation, reduces water-intensity and so enhances the viability of new operations. While enhanced metal recovery from mining waste streams or low-grade ores maximises the output from a mine’s operations.

    The coming years will also see the ‘first life’ of many EV batteries coming to an end. With innovations in recycling enabling the recovery of up to 80% of the lithium contained in a spent battery, it is hoped that recycled materials will make up as much as 10% of our lithium needs by 204015.

    Economies of scale and technological innovations have led to dramatic cost declines in battery manufacture

    Another more straightforward question is being asked within the industry – can lithium be substituted? Salt, seawater, silicon, magnesium, iron and even hemp are all being explored as either lithium alternatives, or additives that could reduce the volume of lithium needed. While lithium remains the go-to for battery manufacturers for now, a fast-growing alternatives sector is springing up as the electrification of the economy creates vast opportunity for more sustainable forms of electricity storage. For instance, sodium-ion batteries are now being tested by several Chinese automakers and more than 20 manufacturing plants are being set around the world16.

    EVs represent a complicated pay-off. On the one hand, they are vital in the shift to a net-zero emissions world. On the other, their production brings with them a raft of environmental challenges. Europe and the US are making serious efforts to achieve lithium independence, with policies aimed at relaxing the regulatory barriers to opening new lithium mines, and incentives to encourage purchasing domestically-sourced lithium. Despite this, with projections that the demand for lithium will reach 550,000 tonnes per year by 2030, it is expected in many quarters that there will be a supply crunch for the ‘white gold’ in the coming years.


    6 Automakers and 30 Countries Say They’ll Phase Out Gasoline Car Sales - The New York Times (nytimes.com)
    2 Assumes a 60 kWh battery pack. Page 10, Critical materials for the energy transition: Lithium (irena.org)
    Net Zero by 2050 - A Roadmap for the Global Energy Sector (windows.net)
    Lithium Market - Bacanora Lithium
    Electric cars fend off supply challenges to more than double global sales – Analysis - IEA
    This chart shows more than 25 years of lithium production by country | World Economic Forum (weforum.org)
    Revealed: how US transition to electric cars threatens environmental havoc | US news | The Guardian
    Lithium batteries' big unanswered question - BBC Future
    The Lithium Triangle: Where Chile, Argentina, and Bolivia Meet (harvard.edu)
    10 Lithium and Latin America are key to the energy transition | World Economic Forum (weforum.org)
    11 Environmental defenders join forces across Argentina to stop mining boom - Waging Nonviolence | Waging Nonviolence
    12 Hard rock lithium vs. brine – how do their carbon curves compare? | Benchmark Source (benchmarkminerals.com)
    13 Subscribe to read | Financial Times (ft.com)
    14 Direct Lithium Extraction • Cleantech Lithium
    15 Executive summary – The Role of Critical Minerals in Clean Energy Transitions – Analysis - IEA
    16 The Sodium-Ion Battery Is Coming To Production Cars This Year - CleanTechnica

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