Investors’ interest is sky-high for critical battery metals such as Lithium

Bolivia: Uyuni’s salt flat. Photo by Diego Aguilar on Unsplash

By Dr Maria Daniela Sanchez-Lopez*

On November 22nd, 2018, the city of Frankfurt in Germany hosted the conference Invest in Global Resources where different market and industry experts discussed the business environment of commodities and investment strategies in mining activities.

A hot topic through the day was the battery market and the supply of critical minerals such as cobalt, nickel, vanadium and lithium. Each of these minerals has growing markets due to the demand of batteries for electric vehicles (EV) and large energy storage systems; yet as it was debated by the experts, there are important challenges regarding supply constraints, quality of the reserves and investment incentives.

The particular case of lithium presents a very interesting scenario. Although there is an abundance of the resource worldwide, the most profitable method of extraction comes from salt-lake brines, particularly in the ‘South American lithium triangle’ in Bolivia, Chile and Argentina.

The region produces 46% of Lithium carbonate equivalent (“LCE”)[1] being the big players Chile (Rockwood/ Albemarle (NYSE: ALB ) and Sociedad Quimica y Minera de Chile (NYSE: SQM ) and Argentina (FMC Corporation (NYSE: FMC) and Orocobre (ASX‎: ORE)).

Lithium demand is projected to increase more than threefold (from 214 (kt)[2] in 2017 to 669 kt in 2025)[3], making it, not only highly profitable but also, a central element in the development of new technologies. According to industry experts, the race for lithium is well on the way with new companies entering the market and the big players expanding production levels. Nonetheless, the supply of lithium faces important challenges in terms of the development of technology to minimise production costs, time constraints for scaling up brine extraction processes and more incentives to secure financial resources for investing.

Challenges for Bolivia

In this scenario, Bolivia and the State-managed lithium company Yacimientos del Litio Bolivian (YLB) would enter the market competition from 2020 onwards. Although the country has the largest world reserve, the high level of Magnesium concentration in the brines is a serious constrains in the Bolivian case and the Uyuni salt flat. The pilot phase has been in operation for more than five years, yet the production levels of Lithium Carbonate are minimal, and the YLB has not entered the global market. A common perception among the experts and lithium companies in the Conference was that Bolivia would be a junior player with a tiny fraction of production in the best-case scenario.

Lithium extracted from brines is a dissimilar mining activity. The chemical engineering process is essential to define a comparative advantage. To promote research and development vis a vis financial resources for investing in lithium require a stable and business-friendly political environment that in the current context, Bolivia seems to be far from.
The race for lithium is on, and the next five years will be critical to gain a market share in a fast-changing environment in constant search for better and more powerful batteries for the low-carbon transition already taking place in the world.

[1] Lithium carbonate equivalent (“LCE”) is the industry standard unit for lithium production and its equivalent in lithium derivates such as Lithium Hydroxide, Lithium Metal, Lithium Concentrate (1 gram of LCE=1 gram of Li2CO3 (lithium carbonate))

[2] Kt= 1,000 metric tons.

[3]  Market projection according to Mckinsey & Company (2018).

* Dr Maria Daniela Sanchez-Lopez is a research fellow at Cambridge University’s Margaret Anstee Centre for Global Studies. She is an experienced economist with an interdisciplinary background in political science, international development and human geography.