The next bottleneck in the supply of lithium-ion batteries is not cobalt, although China has a stranglehold on the market, nor is it nickel, despite the nickel price nearly doubling in the past five months. Cobalt can be partially replaced by nickel, nickel can be partially replaced by manganese, and both can be completely replaced by iron phosphate, which is cheap and abundant.
But there is no substitute for one critical component of these batteries: lithium.
Today’s lithium mines cannot hope to meet skyrocketing demand for the next decade and beyond. Startups like Lilac Solutions and Vulcan Energy Resources saw opportunities and took action with new lithium extraction processes that are more efficient and potentially better for the planet.
As automakers flesh out their electrification plans, they have sparked an unprecedented rush on lithium. In the past six months, lithium prices have gone on an epic bull run.
It started in January, when prices rose to $37,000 a ton from $10,000 a month earlier, according to Benchmark Mineral Intelligence. It then deteriorated in February, with spot prices rising to $52,000 per metric ton before rising again to $62,000 in March. Since then, the situation has stabilized, but prices are still five times higher than the average price from 2016 to 2020.
Large companies of all stripes race to secure supplies. Automakers like Ford and Tesla have signed huge contracts, and battery makers and miners are rushing to secure supplies. For example, last year a threefold bidding war broke out for Canadian miner Millennial Lithium, which has large reserves in Argentina, and the winning bid ended up more than 40% higher than the original bid.
Still, those deals probably won’t be enough to meet projected demand for lithium based on automakers’ current plans. Benchmark Mineral Intelligence expects demand to grow to 2.4 million tons by 2030, from less than 700,000 tons today.
Supply will not be able to keep up given the current pace of new lithium projects.
“By the end of the decade, where we are now with the pipeline, we will see significant deficits growing,” said Daisy Jennings-Gray, senior price analyst at Benchmark.
Last year, lithium supply lagged demand by more than 60,000 tons. Jennings-Gray’s company predicts that the deficit will exceed 150,000 tons by 2030. To meet demand, Benchmark says it needs to invest $42 billion in space by the end of this decade.
Without new lithium projects coming online, things are likely to get worse in the 2030s. By 2040, the International Energy Agency expects demand for lithium to be 42 times higher than it is today.
“It’s an insane number,” said Jordy M. Lee, program manager at the Payne Institute for Public Policy at the Colorado School of Mines. In fact, it may even be too low.
“We have consistently underestimated how much demand for lithium-ion batteries we will have in the coming years,” he said.
With rising demand showing no signs of slowing down, startups have flown into space and introduced new techniques to extract the volatile metal from the Earth.