COVID-19 Opens Opportunity for Mexico’s Lithium IndustryBy Alejandro Ehrenberg | Tue, 04/07/2020 - 15:46
One of the most significant lithium deposits in the world is located in Sonora, Mexico. The deposit is being developed by a JV of Bacanora Lithium and Gangfeng Lithium. Initial site works are expected to start in 1H21.
Also known as white gold, lithium is the fastest-growing battery commodity in the world. Peter Secker, CEO of Bacanora Lithium, said to Mexico Business News: “Lithium demand will continue to grow 15-20 percent up to 2025 and grow by 10 percent thereafter. Post-2025, renewable energies such as solar and wind power will start to play a larger role in demand as their presence in the market continues to grow. The world will need large grid storage batteries that are lithium-based.” Even though there are competing technologies for energy storage that do not require lithium, the white metal holds a central position in the move away from carbon-based energy sources. Its strategic importance in the coming decades can hardly be exaggerated.
The lithium supply chain is heavily China-centric. As reported by Quartz, “China is the biggest consumer of the metal, it is central to supply chains that process lithium and a quarter of the world’s lithium is produced by two Chinese companies. What is more, it has been a major bankroller of lithium projects.” Therefore, the battery metal’s supply chain is particularly vulnerable to shocks like the one the COVID-19 pandemic has caused.
In fact, as Paul Graves, CEO of US battery maker Livent, said to the Financial Times, “the industry is keen to diversify away from China; it is a conversation that is starting to happen that was not happening even six months ago.”
The industry trend to derisk by settling in alternative locations opens a major opportunity for Mexico. The North American country has a prodigious mineral wealth. It has known lithium deposits not only in Sonora but also in Zacatecas and San Luis Potosi. Furthermore, Mexico has a long mining tradition and a solid mining workforce. Its privileged geographical location is bolstered by trade agreements with the world’s top economies. However, this opportunity can also turn into a missed chance. A piece published in Diálogo Chino puts the issue as follows: “(Mexico) is again revisiting the historic dilemma of what to do with its abundant natural resources. Will lithium drive another cyclical export boom or will it serve as a springboard to break this dynamic and explore new development pathways?”
Indeed, merely producing massive amounts of lithium and shipping them elsewhere for processing would mean that Mexico is not taking full advantage of the shift in the white metal’s supply chain. Rather, an effort should be made to move up the value chain and develop regional industries around lithium. Jorge Vidal, Minister of Economy of Sonora, is aware of the opportunity. In an interview with Mexico Business News, he said: “Sonora is home to one of Ford’s older production plants that is about to start using this technology. Lucid Motors, which aims to be Tesla’s competitor, is setting up operations in Arizona with a US$1 billion investment. It has already contacted Bacanora, which will be a win-win for the region in terms of production for the two-country market between Sonora and Arizona.”