Electric Car Demand

Palo Alto, California-based Tesla Motors is a trendsetter in the electric car sweepstakes. Tesla and other builders of electric vehicles in the United States, Europe and China have spiked demand for lithium in the last six months. Many automakers such as Chevrolet and BMW, following in the wake of Teslas success, are preparing to introduce new all-electric vehicles for the masses in the near future.

Around 400,000 customers have preordered Teslas S model, to be delivered by late 2017, since its unveiling in April, and the company expects to manufacture around 1 million vehicles by 2020. The International Energy Agency forecasts sales of more than 40 million battery-powered electric vehicles per year by 2050, up from current annual sales of only around 150,000.

On July 29, Tesla opened its Gigafactory in Reno, Nevada, the worlds largest lithium-ion battery plant. In addition, China is ordering large amounts of lithium, and it recently introduced a huge public transportation project based on electric buses to curb air pollution in its megacities. Also, a state-corporate mining dispute in Chile, the largest holder of identified lithium reserves in the world, has tightened the supply of lithium on the global market.

The last few months has witnessed a buying frenzy for lithium, dubbed white petroleum for its silver-white color and use in car batteries. Some oil majors are even trying to make forays into the battery business to keep up with the trend. For example, Bloomberg reported in May that Frances Total recently made a bid to acquire Saft, the Paris-based battery maker for U.S. $1.1 billion.

Lithium carbonate prices rose 47 percent in the first quarter of 2016, while prices for lithium hydroxide from Chinese suppliers rose to $30 per kilogram in June, according to the most recent data available from Benchmark Mineral Intelligence, a battery minerals data provider. Identified lithium resources total 6.7 million tons in the United States and approximately 34 million tons in other countries, according to the United States Geological Survey, Mineral Commodity Summaries for 2015.

Expensive Production

Most lithium is recovered from brine or water with a high concentration of lithium carbonate. Subsurface brines trapped in the Earths crust are the major source material for lithium carbonate. These sources are less expensive to mine than rock such as spodumene, petalite and other lithium-bearing minerals.

Production of lithium from brine begins by pumping the brine into evaporative ponds as is done in Chiles vast salt flats in the Atacama Desert where the brine is spread in the desert to dry. Over 12 to 18 months, evaporation increases the lithium concentration, and the liquid is pumped to a recovery plant where it is treated with soda ash, precipitating lithium carbonate, which is then filtered and dried.

Extracting lithium from mineral sources is more expensive and involves a wide range of hydrometallurgical processes. The ore is first crushed and heated, then treated with sodium to displace the lithium. The resulting concentrate is milled into a fine powder and mixed with sulfuric acid. After a number of other steps, soda ash is added, and lithium carbonate is crystallized, heated, filtered and dried.

Grease manufacturers in Russia, India and China buy the mineral on the spot market, not on contract as it is done in the West. And demand in China spiked after its electric bus transportation program was revealed, Terry Dicken told LubesnGreases in an interview in Moscow in May.

Dicken, a consultant and chairman of the European Lubricating Grease Institute, said, The price of lithium has gone up five times in five months, and some grease manufacturers are getting ready to increase their finished product prices because their contract prices went up. In addition, many grease producers have been affected by the recent supply issues surrounding lithium hydroxide, and several have started an active development programs looking at alternative thickener systems, according to Dicken.

He noted that another issue affecting the cost and availability of lithium is that we still havent found a way to recycle [lithium-ion] batteries very easily. Some companies are doing that, but on a very small scale. Maybe, in 10 years when more batteries become available, the technology will be there. However, at this moment, the cost of recycled lithium is much higher than that from mined material.

The increase in lithium demand for automotive batteries has caused dramatic price increases for lithium hydroxide used in many lubricating greases, Johan Stureson, CEO of Axel Christiernsson, told LubesnGreases. This price increase affects all grease manufacturers, and Axel is no different.

Stureson said that the companys response to the situation includes entering long-term supply agreements with reputable LiOH suppliers to secure the availability of this critical raw material. Also, it has implemented a special price review to help recoup the increased raw material cost.

Nol, Sweden-based Axel Christiernsson, has production sites in Sweden, the Netherlands, France and the United States. It is the largest grease maker in Europe. In 2015, it held 14 percent of the European grease market, according to the National Lubricating Grease Institute annual survey.

Lithium Alternatives

Dicken foresees big changes in the use of grease thickeners. Since Ive been in the grease industry in the last few decades, weve always talked about lithium and the lithium complexes. This unique situation, when lithium supply is expected to stay tight for at least five to ten years, could be a catalyst for change.

As the cost of producing lithium greases increases, some producers are finding alternatives in other thickeners, primarily calcium. Dicken is confident that an increasing number of market players will now turn to other soap thickeners such as calcium and possibly polyurea. I spoke to a number of companies who said that they are moving to calcium-based greases and are getting ready to put those products on the market, he revealed.

Axel said it offers alternative grease technologies to customers who wish to avoid the exposure to volatile LiOH prices. Anhydrous calcium is an excellent choice for many applications treated with lithium greases today, Stureson said.

Dicken noted that metallic grease thickeners have to be registered under REACH if they are produced or sold into the EU, and lithium 12 hydroystearate is now registered by some producers. However, some calcium soap thickeners are exempt under the REACH regulation. It depends on how the calcium salt is being made. If it originates from natural products such as vegetable oils or vegetable acids, the companies dont have to register their products under the regulation, Dicken explained.

Global grease production has been fairly stable at around 1.1 million tons in the last few years, according to ELGI. In 2015, the largest end-users of lithium were the battery manufacturers that used 35 percent of all lithium supply, followed by ceramics and glass producers that used 32 percent and lubricating greases that used 9 percent of the total world lithium supply, according to the U.S Geological Survey.

Oversupply Warnings

For some analysts, the changing market conditions appear to be a short-term phenomenon. The frenzy for lithium from electric car makers could lead to a supply glut, and some warn that the metal could eventually fall victim to oversupply issues that often plague commodities when producers rush to catch up with rising orders.

Some industry insiders said demand for lithium could remain
strong for three to five years. After that, though, the market could tip into oversupply as new capacity arrives.

As an example, Graham Kerr, CEO of South32 Ltd., a Perth, Australia-based metals and mining company, said he is wary of investing in the lithium market on the basis of a battery technology that is evolving quickly. It is one of those niche kind of commodities that can be the flavor of the month, he said in an interview cited by the Wall Street Journal. But if technology moves a different way, it doesnt have many multiple uses.

Teslas Chief Operating Officer Elon Musk and the companys Chief Technology Officer Jeffrey Brien Straubel have attempted to play down the role of lithium in lithium-ion batteries. During a recent event, Musk said that the amount of lithium in a typical battery is about 2 percent of its total volume and that lithium in a salt form is virtually everywhere …. There are definitely no supply issues with lithium.

Dicken is not so optimistic even though suppliers seem to be playing down the current supply issues. Lithium may be virtually everywhere, but its conversion to a usable salt is not always straightforward. I guess alternative power sources could be found and developed for electric vehicles, but lithium-ion battery power seems to dominate at present, he said. But the reality is that, in some markets, the cost of lithium hydroxide has risen by orders of magnitude over the past year.