Lithium is one of two commodities—cobalt being the other—that has gained the most since the beginning of 2021 on strong demand from the electric vehicles (EV) sector.
According to the Trading Economics website, lithium has gained 41 percent since January 1. Based on the Chinese spot prices for lithium carbonate, which is used in making lithium batteries, the metal is quoted at 65,500 Chinese yuan (Rs 7.40 lakh) a tonne.
US multinational and financial services group Morgan Stanley has projected a 50 percent growth in EVs in 2021. Sales of EVs are particularly higher in Europe as the continent looks to decarbonise by 2030 by phasing out vehicles running on fossil fuels.
The development has shifted the focus on lithium, whose prices are currently at a six-year high.
What is lithium and its source?
According to Austrade, lithium has been in the forefront of many technological changes since the 1990s with the commercialisation of lithium-ion batteries. It is the reason for the revolution in mobile phones, smart gadgets and tablets.
Lithium is the lightest known metal and is the least dense solid element. It has got good electro-chemical potential in view of a low melting point which makes it suitable for many metallurgical applications.
Lithium is extracted from minerals found in igneous rocks composed of large rocks (spodumene) or in water with high concentration of lithium carbonate.
Both processes contribute equally to lithium production today.
Lithium carbonate is the main source for lithium. Lithium carbonate is a stable salt that is refined to produce the metal. However, it has to be handled carefully in view of its highly reactive nature.
According to Barrons, some 5.3 tonnes of lithium carbonate can help produce one tonne of lithium.
According to NS Energy business, global lithium mineral reserves are about 80 million tonnes with Bolivia holding 21 million tonnes of it, followed by Argentina with 17 million tonnes and Chile nine million tonnes.
The US (6.8 million tonnes), Australia (6.5 million tonnes) and China (4.5 million tonnes) are the other three countries where major lithium reserves can be found.
According to the Atomic Minerals Directorate for Exploration and Research, a unit of the Department of Atomic Energy, India has 1,600 tonnes of lithium resources in rocks in Marlagalla-Allapatna region in Mandya district, Karnataka.
How much of lithium do EV batteries contain?
Batteries in EVs have a few grams of lithium that can at best be termed equivalent to half a teaspoon of sugar. An EV can have 5,000 battery cells and an EV could need 10 kg of lithium. One tonne of lithium can help meet the demand of 90 electric cars.
These batteries are lithium-ion that have many individual cells. About 60,000 tonnes of lithium carbonate equivalent are required to produce one million electric cars.
Tesla owner Elon Musk recently tweeted that 30 million electric cars need to be produced by 2027, and that would require 1.8 million tonnes of lithium carbonate equivalent. This would mean production of lithium carbon equivalent will have to increase 473 percent to 1.8 million tonnes from 2019 levels of 3.8 lakh tonnes.
Tesla itself plans to increase its battery manufacturing capacity at least 50 times more to three terawatt hours from its current capacity by 2030. This would require investments to the tune of $7 billion (Rs 51,025 crore), but it is comparatively lower if investments in batteries and car manufacturing are considered.
Lithium-ion batteries are preferred as they are rechargeable and they made up 54 percent of the demand for the metal in 2019. They are scalable and have higher energy density besides a longer life-cycle with lower maintenance.
Are there any alternatives to lithium carbonate?
Lithium hydroxide is an alternative to lithium carbonate and demand for it is increasing. EV industry analysts expect lithium hydroxide demand to exceed that of lithium carbonate in view of developments in battery technology.
Lithium hydroxide is seen as a better performer than carbonate in batteries, increasing their performance and lifespan. This is because a higher temperature is required to synthesise cathode material with lithium carbonate. This damages the crystal structure of the cathode and changes the oxidation state of the nickel metal in the battery.
While producers extracting lithium from spodumene, a method that is on the rise, can use either carbonate or hydroxide process, those extracting it from brine use carbonate process.
In Spain, a project has found that producing lithium hydroxide from spodumene costs lower than producing lithium carbonate from brines.
What’s the reason for Chinese dominance in lithium?
There are a few reasons for this. One, spodumene in the form of concentrate is exported to China for processing. From here, it is sent to Japan and South Korea to produce battery packs.
China processes 89 percent of the total lithium hydroxide available in the world.
Chinese automobile makers are investing in increasing electric vehicles capacity. The Chinese government is also extending subsidies to automobile makers and Beijing is set to pass a new law to support production of new EVs.
EV industry experts say that Chinese subsidies have either been equal to or higher than production costs, though they could end in a couple of years.
In 2021, the media reported that subsidies for new energy vehicles in China would be reduced 20 percent. Last year, Beijing extended a subsidy of $2,500-3,500 (Rs 1.82 lakhs-2.55 lakhs) for an electric car that had a driving range of 300 km. Besides, China is also the largest supplier of batteries and EVs other than being the top producer of both.
In addition, Chinese firm Tianqi Lithium Co is the largest producer of lithium compounds and it also has a 23.77 per cent stake in Chile’s SQM, another major producer.
Though South Korea and Japan have developed and fine-tuned battery manufacturing technology, China has increased its battery manufacturing capacity, thanks to its dominance in lithium refining.
According to Austrade, Beijing has improved its scale of economies also.
How is India placed?
India is handicapped by a meagre lithium resource that has been found recently. This has resulted in the country importing lithium. Its imports trebled between 2017 and 2020.
But it will soon have its first lithium refinery that will be set up by Manikaran Power Limited, a power trading and renewable energy company, at an outlay of about Rs 1,000 crore in Gujarat.
The refinery will import ore from Australia and refine it for use by lithium-ion battery makers. A few battery makers are planning to set up units in Gujarat and they will likely gain from this.
This will help Indian EV producers to source batteries locally rather than import from China, Japan, Korea or Taiwan as is being done now.
EV and battery manufacturers, however, have to watch out how lithium prices behave in the short and long term. Any rise in the metal’s price will lead to consequent rise in vehicle price.
Though production is unable to match demand, industry experts expect price to drop particularly with growing use of lithium hydroxide.
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