As the EV market expands, long-term demand for lithium will be sky high, presenting huge opportunities and challenges for the mining industry.
Lithium is the lifeblood of the global energy transition, playing a crucial role in the production of batteries for electric vehicles (EVs). Although demand has temporarily tailed-off, as EV adoption has stalled, over the long-term the mining industry faces the challenge of scaling a lithium production to meet global needs, but in a sustainable fashion.
The process of extracting lithium varies depending on its source. In brine deposits, lithium-rich saltwater is pumped into a series of evaporation ponds. As the water evaporates, the resulting concentrate is processed into lithium carbonate or lithium hydroxide, key components in battery manufacturing.
For hard-rock deposits, the ore is mined through traditional methods, then crushed and processed to extract the lithium. This method, while more energy-intensive, can often produce higher-grade lithium more quickly than brine extraction.
Explaining just how vast demand will be for lithium is Brian Menell, a South African businessman with interests in mining, agriculture, and banking. Menell is CEO and Chairman of TechMet, an investment company with stakes in lithium extraction and processing businesses.
He says: “Tesla’s target of producing 20 million electric vehicles a year by 2030 would require almost seven times the present total global annual supply of lithium. That’s before considering GM, Ford, VW, or Chinese manufacturers, who will continue to produce two-thirds of the world’s batteries and electric vehicles.”
Such stratospherically high demand presents huge opportunities for the mining sector but also brings colossal challenges, especially in terms of sustainable production and ESG credentials.
Mining by its nature ‘not sustainable’
Menell stresses the importance of responsible mining practices: “Mining by its nature is not sustainable. You’re exploiting a finite resource, and nothing that develops a natural resource is without environmental impact. Yet it’s wrong to see the mining industry or lithium production as incapable of being well-governed, transparent, and of low environmental impact.”
The geopolitical landscape of lithium production is shifting. While Australia currently leads global extraction, accounting for over 40% in 2022, other regions are seeking to establish themselves in the market.
In the UK, British Lithium is working to extract lithium from Cornwall’s granite. Roderick Smith, Director of British Lithium, explains the advantages of European production: “Australia is good at mining but not at adding value to natural resources. It’s the quarry of the world but it has no car industry. Its lithium is all going to China, where they make batteries and cars.”
British Lithium’s Cornwall operation, on the other hand, seeks to serve regional manufacturers, including a new battery factory planned by Tata Motors in Somerset, West England. The company is using innovative extraction methods, as Andrew Smith, CEO of British Lithium, explains: “The lithium that occurs in Cornwall is unique. We use a physical separation methodology to remove the lithium mica from the rock, make a concentrate, heat it, dissolve it in pure water, change the pH, and refine it into battery-grade lithium carbonate.”
Smith also flags the environmental benefits of its process: “The carbon emissions are less than half the best current producing hard rock mine, and water consumption is way ahead of brine extraction.”
Lithium ‘needs transparent pricing mechanisms’
As lithium production increases, the need for efficient market mechanisms becomes apparent. The London Metal Exchange (LME) is positioned itself to play a crucial role in this evolving market.
Robin Martin, Head of Market Development at the LME, says: “Almost no lithium trading is done on open markets. Most sales are made through long-term agreements between producers and customers. Pricing isn’t particularly transparent.”
This lack of transparency can lead to marked price volatility, says Martin:
“At the beginning of this year the lithium hydroxide price was around $85,000 per tonne. Now it’s trading at closer to $28,000. So in less than a year, the price has come off by two-thirds.” – Robin Martin, Head of Market Development at the LME.
The LME is working to address these issues by promoting index-based pricing and introducing a passport system for sustainability standards. Martin argues these measures will help car makers and battery producers better manage price fluctuations and ensure supply security.
The rapid growth of the EV market is not only driving demand for new lithium sources but also creating opportunities in the recycling sector. As the first wave of electric vehicles reaches the end of its lifecycle, battery recycling is emerging as a crucial component of the lithium supply chain.
In Norway, Hydrovolt, a joint venture between battery maker Northvolt and aluminium producer Norsk Hydro, operates Europe’s largest battery recycling plant. The facility processes used car batteries, recovering up to 95% of critical raw materials.
This ‘urban mining’ approach could become an increasingly important source of lithium and other battery materials. As more countries adopt electric vehicles, similar recycling operations are emerging globally, potentially reshaping the lithium supply landscape.
Lithium recycling key to sustainable supplies
In the UK, metals and mining firm Glencore and Britishvolt – a startup manufacturer of lithium-ion batteries – have revealed plans to build a battery plant in southeast England to recycle lithium-ion batteries.
The companies’ recycling plant will reuse expensive key raw materials, the most important of which will be cobalt and lithium.
They plan to use 100% renewable energy to recycle the materials at was once the UK’s largest coal-fired power station.
David Brocas, Head Cobalt Trader at Glencore said: “Both companies are united in their ambition to further the energy and mobility transition. Glencore has decades of recycling experience across multiple disciplines, including e-waste, copper scrap, and batteries.
“This recycling partnership complements our long-term supply agreement for responsible cobalt from our operations in Norway and the Democratic Republic of Congo.
“We believe the opportunity to utilise BRM’s operations as a cutting-edge battery recycling facility will help support the development of a UK battery recycling industry. It will also play a part in furthering the UK’s climate ambitions as well as Glencore’s as we work towards net zero total emissions by 2050.”
Glencore’s initiative shows that, although demand for lithium is set to soar, companies must navigate the complex issues of sustainability, not just geopolitics and market volatility.
As the lithium industry evolves, mining companies need to balance the pursuit of new lithium sources with sustainability demands, by maximising the potential of recycling.
TechMet’s Brian Menell summarises the scale of the opportunity: “If any material is a candidate to be the oil of the 21st and 22nd centuries then it’s lithium.
“Lithium is overwhelmingly dominant in the electrochemical arena, and chemical storage is going to be one of the cornerstones of the global industrial and technological landscape for the next hundred years.”
