US commits to global lithium battery revolution

Lithium Power International highlights the global impact of the US’s recent investment into the lithium battery revolution.

The US Government’s commitment to the lithium battery revolution had its doubters until late in October. That was when the Biden Administration committed to supporting the rapid development of domestic mining, processing and manufacturing industries required to catch up with China and Europe. Naturally, the top of the list is lithium. While the US is home to EV pioneer Tesla and other ambitious lithium battery businesses, some are dragging the chain by remaining tethered to oil-era technology. No more, however. The government will fund 20 companies across 12 states to strengthen US independence in the new electric age, spur job growth and lower costs.

US lithium infrastructure investment

Funding of $2.8bn has been pledged by Washington, while an added $6.2bn has been promised by the 20 companies named as recipients. It is only the first instalment. The money will be used to build and expand facilities to extract and process lithium, graphite and other lithium battery materials, make components and demonstrate new approaches. To explain what was meant by approaches, the announcement cited an example based on manufacturing components from recycled materials. There are already companies working aggressively in this area, but huge sums are needed to expand and catch up to global competitors. The underlying goal that President Joe Biden has set is for half of all new vehicles to be electric by 2030, and for the US economy to report net-zero emissions by 2050.

There have been deep concerns that the lithium battery era could erode the US’s position as a global industrial leader unless the Federal Government supported industry initiatives. The nation became the world’s manufacturing leader early in the twentieth century thanks to its wealth of minerals, can-do attitude and expanding home market. The nation has large reserves of lithium but has been slow to develop much of it. The same goes for other critical battery minerals such as cobalt, nickel and graphite. By increasing the use of minerals from within its own borders, the US aims to strengthen its supply chains, secure economic competitiveness and energy independence and bolster national security.

The announcement made it clear that the US was coming from behind. “Currently, virtually all lithium, graphite, battery-grade nickel, electrolyte salt, electrode binder and iron phosphate cathode material are produced abroad, and China controls the supply chains for many of these key imports,” it concedes. The promise being made now is this will be the first phase of a total $7bn outlay to be provided under the sweeping Bipartisan Infrastructure Law. That legislation covers a slew of promises covering high-speed internet, roads and bridges, public transport, airports and environmental remediation. The Department of Energy is expected to move quickly on funding opportunities to fill domestic battery supply chain gaps. This fits a pledge for the initiative to be focussed on the long term so that its impact has a lasting effect.

Other arms of government, including the Department of the Interior, the Partnership on Global Infrastructure and Investment and the Department of State, aim to leverage the new programmes. “The initiative will co-ordinate domestic and international efforts to accelerate critical permitting for critical minerals projects, ensuring that the United States develops the resources the country needs in an efficient and timely manner while strengthening tribal consultation, community agreement and environmental standards,” the announcement said.

Within hours of it being released, expectations soared because of the uncapped nature of the tax credits on offer. Credit Suisse estimated that federal climate spending would be double the baseline estimate of the $400bn that was outlined, while the multiplying impact of private investments and green financing programmes could raise the total to nearly $1.7tr over 10 years. The investment bank said tax credits would provide long-term certainty and flexibility and be technology agnostic. It added that the US should end up with the lowest levelised cost of clean energy globally.

Business groups also reacted positively. Michael Stumo, CEO of the Coalition for a Prosperous America, which works to balance trade, create jobs, and promote wealth, said the plan would help to achieve the nation’s electric vehicle ambitions. Writing in The Washington Times, however, he noted that the building blocks for EVs were still largely imported, even as demand for key battery materials was exploding. “World Trade Organisation rules have proved fruitless in dissuading Beijing from using its alarming grip on raw materials as a source of geopolitical leverage,” he wrote. “It is predicted that by 2040, the demand for EV inputs of lithium, nickel, graphite and cobalt could increase by a staggering 30 times. Unfortunately, China has already established a stranglehold on these resources, since Beijing controls 70% of the world’s lithium supplies and almost all of the world’s graphite.”

Expanding to Canada

The initiative is being extended to Canada, with reports that the Pentagon is being asked to fund projects covering EVs, batteries, and even weapons. There is said to be a list of 70 projects north of the border that could warrant funding.

Canada, too, has only a small critical minerals industry but has cobalt, lithium, and manganese projects that could be attractive to mining and battery companies. It also has long had a large and vibrant mining sector, including companies with a global outlook and strong skill bases. It also wants to finance likely projects to maximise the benefits of the lithium revolution.

Increasing mineral production for lithium batteries

In a recent paper on the topic, the consultancy Benchmark Minerals noted the world needed to produce more than 25 times lithium output by 2050, compared with output in 2021. The research group says that the main driver will be stationary energy storage rather than today’s focus on EV batteries. That may come as something of a surprise to many. The battery storage sector is expected to require some two-thirds of the 11.2 million tonnes of lithium that is expected to be produced each year by that time. “The long-term path for lithium has been set, yet the supply chain scaling challenge has just begun,” warns Benchmark’s chief executive Simon Moores. “We are just at the beginning of a generational challenge, not one that is going to be solved in the 2020s.”

Benchmark’s forecasts show that 2.9 million tonnes of LCE (lithium carbonate equivalent) are expected to be produced each year by 2032. Compare that with the 2.7 million tonnes in total produced from 2015 to 2022. By 2040, one month’s lithium needs are expected to equal all of the battery-grade lithium produced in 2021. Moores says that scaling the industry has only just begun. Benchmark was aware of 40 lithium mines in production around the world in 2022. By 2050, it sees a need for 234 new lithium mines unless a significant scale of battery recycling is underway. That is unlikely to be the case, but Moores quoted these forecasts to provide a clear view of the challenge ahead. By 2040, he expects that nearly 20% of lithium chemicals will likely come from recycling old batteries. For now, however, the low number of older EVs means that recycling will take years to reach a scale that has an impact.

Tesla stole a break from the US Government when, a month before the Washington announcement, it announced it would build a lithium hydroxide refinery in Texas. This was hailed as the first such investment by a local automaker. The new plant will be fed by spodumene, a form of lithium derived from hard rock as opposed to salt lakes. Tesla also plans to build a cathode factory. Morgan Stanley said these plans indicated that the EV maker wanted more control over its operations. “Tesla strives to make major changes to battery technology, design, manufacturing, and supply chain, all at the multi-TWh scale. To achieve this feat, we believe Tesla must establish greater control over its supply chain in batteries and take larger steps towards vertically integrating its own supply chain.” The same attitude is likely to apply to other automakers.

With the production of battery-grade lithium needing to increase, there is also a requirement for improving the standard of the lithium produced. Previously, battery-grade lithium had a purity of 99.3%, this increased to 99.44%, and since 2019, the standard has been at 99.5%. Now, Lithium Power International has exceeded this current standard, producing lithium carbonate with a 99.92% purity battery grade at its Maricunga lithium project. For the EV revolution to take shape, companies should not only look to increase lithium production but also improve refinery processes.

Rising EV production

Australia will benefit from the US initiative. It is the world’s largest lithium producer. US companies like Albermarle, General Motors and Ford Motor are teaming with local companies to boost lithium production further from existing and new mines. This includes the investment in lithium refineries, which will conform to high environmental standards.

Reuters notes that auto companies are expected to spend nearly $1.2tr by 2030 to develop and produce millions of EVs, along with the batteries and raw materials to meet their goals. This investment figure is more than twice the number released by Reuters just a year earlier. Car makers have plans to build 54 million battery-electric vehicles by 2030, representing more than 50% of total vehicle production. That will require 5.8 terawatt-hours of battery production capacity. While the numbers are large, they may be proven conservative because Tesla alone has plans to build 20 million EVs. That would represent a 13-fold expansion over the number of EVs it expects to build this year, and require three terawatt-hours of batteries. It would also account for more than half the total expected battery output.

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Andrew Phillips

Executive Director & Chief Financial Officer
Lithium Power International Ltd (LPI)
Phone: +61 2 9089 8723
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