To achieve the 2°C Paris Agreement objectives, the transportation sector will have to curb its CO² emissions as a matter of urgency. A four-to-one reduction from 2005 levels is necessary by 2050. Such action requires massive deployment of electric vehicles, which currently represent 75% of the market.
In a study by ADEME and IFPEN, experts worry that such ambitions will affect the criticality of lithium. Material criticality depends on its geological availability, its environmental impact and the vulnerability of the countries or companies producing it. "In this sense, lithium, a strategic metal in the production of batteries, is quite representative of new issues related to the energy transition," said the authors.
In the long run, there is little "geological supply risk". Lithium is abundant on the planet. As soon as miners seek it, the metal is found in large quantities. Since 2005, the development of the electric vehicle, and the rise of portable batteries have quadrupled the number of known sources.
The special case of Bolivia
Despite the abundance of lithium, its distribution is very unequal. Lithium production is concentrated in Australia, Chile, Argentina and China. "These four countries account for about 80% of production and the ‘lithium triangle’, which includes Argentina, Bolivia and Chile, accounts for 55% of the world's reserves." This South American concentration raises concerns.
"Bolivia is a unique case in the commodity economy: it has the world's largest lithium reserves located in Salar de Uyuni but currently does not produce lithium, and the strategy of current President Evo Morales is to favour local industry…However, the government questions the consequences of the development of lithium production from an environmental standpoint ", says the report.
In Argentina, the 2015 arrival of President Mauricio Macri allowed the industry to expand by encouraging foreign direct investment, but a change in political parties could impact this strategy. Chile has opted for a public-private policy. The lack of coordination between these three actors would limit the growth of global production.
A silver lining in recycling
Adding to this is uncertainty is China, a major player in lithium ion batteries. Beijing supplies 50% of the cathodes in the world. "In this context, developments in China's trade policy (quotas, embargo) must be analysed," warn the authors. In 2010, Beijing had already threatened the global industry with a ban on rare earth minerals.
This country risk is reinforced by the small number of manufacturers in the lithium market. Three American business giants, FMC, SQM and Albemarle, control 50% of the production and another 40% are in the hands of Chinese actors. This limited number and lack of diversity favour price volatility, especially in case of vulnerable companies (bankruptcies, consolidations, etc.).
Faced with these uncertainties, the report highlights recycling as a solution. All countries have "urban deposits". 28 tons of Li-ion batteries are enough to produce a ton of lithium, as opposed to 250 tons of ore or 750 tons of brine! This is a nice advantage, but such technology remains complex.
Currently, recycled lithium represents less than 1% of supply. Countries highly dependent on imports will rapidly develop this sector. So much so that a 90% recycling rate is expected by 2100. However, country risk will not completely disappear since the leader in this shift will once again be China.
Ludovic Dupin, @LudovicDupin