Boosted by the global energy transition, demand for lithium is pushing the market to bullish levels. Within this environment, China reigns supreme, but other countries such as Mexico could look to compete, said Henry Sanderson, Executive Editor, Benchmark Mineral Intelligence.
Sanderson explained that the battery supply chain is mainly located in China. He pointed out the challenges Western countries face to catch up with the economic powerhouse. Nevertheless, China’s competitors can still take steps to close the gap.
Sanderson asserts that building this supply chain could be difficult and take time, as China dominates the midstream of the industry. Nonetheless, he argues it is possible to build the processing capabilities to compete with China.
“The key challenge facing lithium is on the supply chain, demand is not the constraint,” said Sanderson. Some key challenges the supply chain faces are access to raw materials, access to regional refining and rising operational costs. He states that the more the prices go up, the cost of electric vehicles also increases. But reshoring is a costly process, so companies must be careful that their expenses do not turn out higher than they are in China.
Some of the efforts the Western hemisphere is already pushing include a mineral security partnership, a US$600billion partnership to build a global infrastructure to compete with China’s Belt and Road Lithium Mining, a mammoth in the budding industry. Other initiatives include an EU-Japan Green alliance, as well as a EU-Canada Partnership regarding raw materials. With these prospects, the global west aims to build a new, competitive lithium supply chain.
On the back of these developments, North America and Europe are beginning to gain ground, albeit slowly. Benchmark Mineral Intelligence foresees that for 2031, global installed capacity for lithium batteries, a key proponent of the clean energy transition used to store renewable energy, will be at 6660.6GWh. Of this figure, China would produce 70 percent of the capacity, North America 12 percent, Europe 15 percent and the remainder of Asia 3 percent. Therefore, China does not completely dominate the market, as some key battery producers come from other countries.
Nevertheless, Henderson holds that battery production is the “easy part.” The actual challenge is to make waves in other areas of the supply chain. The extraction, chemical processing, cathode and anode production, cell manufacturing and application of the mineral will be more difficult to master. This is because of the minimum of five years required to set up businesses and infrastructure to carry out these activities. Increasing natural gas and oil prices are making manufacturing much tougher, too. “It is going to be difficult to build new battery material processing plants and refineries in Europe against this backdrop,” added Henderson. However, he sees many industrial processes move to areas where clean energy development is strong and energy prices are therefore lower, such as in Quebec. Mining companies themselves are also part of the creation of these sustainable industrial hubs.
Henderson concluded much investment is needed to solve the price volatility in lithium supply chains. In the short term, the west will not be able to reduce its reliance on the Chinese lithium supply chain. However, it can invest in building mines and focusing on building processing capabilities. On the back of this diversification, the global energy transition gains a much-needed boost.