Electric vehicle targets ‘impossible’ without changes to lithium pipeline

Battery manufacturers are confronting a severe lithium shortage, highlighting the need to challenge China’s dominance of raw material supply chains, an Australian lithium producer has warned.

Stuart Crow, chair of Lake Resources, said western companies and governments had failed to build adequate supply chains for lithium, making the sudden boom in electric vehicle manufacturing unsustainable.

“There simply isn’t going to be enough lithium on the face of the planet, regardless of who expands and who delivers, it just won’t be there,” he said. “The carmakers are starting to sense that maybe the battery makers aren’t going to be able to deliver.”

Lithium-ion batteries play a critical role for governments hoping to decarbonise their economies, and the west is working to loosen China’s grip on the lithium supply chain and processing capacity in particular. Disruption from the war in Ukraine and subsequent sanctions imposed on Russia have also underlined the importance of supply security.

Lake Resources’ share price more than doubled in March, giving it a market capitalisation of A$2.5bn (US$1.9bn), after it signed a memorandum of understanding with the Japanese import-export group Hanwa to deliver 25,000 tonnes of lithium carbonate a year.

“Right now China owns basically 70-80 per cent of the entire supply chain for electric vehicles and lithium-ion batteries, and therefore energy storage,” Crow said. “The west has been remarkably slow to adopt a strategy to try and assist and secure a supply chain.”

Daniel Morgan, a mining analyst at investment bank Barrenjoey, said it was “impossible for the [EV production] targets being made by either carmakers or governments to be met”. He added: “There’s a great love of throwing out lofty targets, but where the rubber hits the road it’s not going to happen.”

Lake Resources, which is listed on the Australian Securities Exchange, is developing a lithium production plant in Argentina. There it will use technology developed by US company Lilac Solutions, backed by Bill Gates, to extract lithium directly from brine, rather than via the more common evaporation method.

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It plans to produce 50,000 tonnes of lithium carbonate a year by 2025 and is focused on building supply chains that bypass China.

Lake Resources’ plant in Argentina has by itself yet to produce any lithium carbonate, despite having been set up in 2015. Crow said that was a result of the time it takes to develop lithium projects, which carmakers had not adequately factored in when setting their EV production targets.

“The forecasts for the [lithium] deficit this year vary from 50,000 tonnes per annum out to 400,000 tonnes, on a market that looks potentially to produce 450,000 tonnes a year,” he said. “Anecdotally, we’re hearing stories of two very large battery makers in the market trying to source 150,000 tonnes [each] of lithium hydroxide this year. And with 450,000 tonnes of supply, it’s not going to happen.”

While the US wants half of all car sales to be EVs by 2030, the EU has proposed banning internal combustion engine car sales altogether by 2035. Major marques including Volkswagen, Ford, Stellantis, General Motors and Toyota have all announced ambitious targets to ramp up EV production and phase out petrol cars.

The International Energy Agency estimates global EV sales must reach 47mn a year by 2030 to ensure transport emissions are consistent with its “sustainable development scenario”, which would keep global warming “well below” 2C in line with the Paris climate accord.

Mining group Rio Tinto predicts demand for lithium will rise by 25-35 per cent a year over the next decade.

Barrenjoey’s Morgan said 28mn EV sales by 2030 was a more realistic projection, but even that would not be possible with current announced lithium projects. Indeed, it would require lithium production to increase six-fold between now and 2030.

“There’s eight years until 2030. We need to start hearing about new projects now,” he said, adding that it was a “great time to be a miner”.