Elon Musk and “Mr. Lithium” are both right about the issues surrounding lithium’s supply and demand.
Lithium prices are rising to human levels — especially for a metal that isn’t rare. The issue isn’t rarity or scarcity, but it’s how to get it out of the spodumene and into an EV battery. Tesla CEO Elon Musk spoke about this during Tesla’s Q1 2022 earnings call. Lithium expert Joe Lowrey, who is known as “Mr. Lithium” in the mining community, also shared his thoughts in a recent Bloomberg interview.
Mr. Lithium pointed out that the gap between the growth of lithium supply and demand has gotten quite large, and will continue to get larger.
“In the next two years, even though there will be significant growth in supply, it will be less than demand, so the gap will just continue to grow.”
He added that he does believe that there will someday be an oversupply of lithium, but that it won’t happen during this decade. He shared why he thinks it’s taking so long for lithium supply to catch up to demand, which shows that the consumption of lithium has almost quadrupled since 2010.
Mr. Lithium explained that lithium isn’t a commodity but a specialty chemical.
“Lithium is often compared with iron ore or other major commodities, and it behaves nothing like that. The auto industry is just finally figuring that out. Lithium qualification for an auto company can take over a year.”
Price of lithium has gone to human levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.
There is no shortage of the element itself, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow.
— Elon Musk (@elonmusk) April 8, 2022
Elon Musk also shared more concerns about this during Tesla’s recent Q1 2022 earnings call on April 20th. He pointed out that mining and refining lithium appeared to be a limiting factor and responsible for most of the cost growth in the sales.
“So, right now, we think mining and refining lithium appears to be a limiting factor, and it certainly is responsible for quite a bit of cost growth in the sales. It’s, I think, the single biggest cost growth item right now, percentage basis, although just for those who don’t totally know this, the actual content of lithium in a lithium-ion cell is maybe around 2 or 3% of the cell .”
He also emphasized that there isn’t a shortage of lithium ore in the world but that the ore needs to be extracted and refined —essentially the same thing Lowrey pointed out.
“At what rate can lithium-ion cells increase the gigawatt-hours per year? That is the fundamental limiting factor and that will move as fast as the slowest, least lucky element of the whole supply chain. Currently, we see that as being a challenge with lithium, and to be clear, it’s not that there’s a shortage of lithium ore in the world, lithium is present almost everywhere, it’s a very common element
“However, you still need to dig up the ore, dig up basically the spodumene or whatever, the clay with the lithium, and then you need to go through a whole series of refinement steps. And that’s a lot of industrial equipment that’s needed to go to refine lithium or to lithium that can be used as lithium hydroxide or lithium carbonate in the battery cell. So, we think we’re going to need to help the industry on this front, but I mean the industry is growing fast and I certainly encourage entrepreneurs out there who are looking for opportunities to get into the lithium business.
“I mean, Zach, correct me if I’m wrong, but I think we’re seeing cases where the spot lithium price is 10 times higher than the cost of extraction. So we’re talking 90% margins here. Can more people please get into the lithium business? Do you like minting money? Well, the lithium business is for you.”
Editor’s note: I know that was directed at a different Zach, but I’ll take the opportunity to chime in on some things. First of all, it has been clear for a few years here at CleanTechnica that this is what would happen in the market without a big increase in investment in the lithium mining and processing sectors. The fact that it seems to come as a surprise to Elon and team is … surprising. This is straight-up what several lithium experts were telling us in interviews a couple of years ago. Stroll through our lithium archives or our interviews with Howard Klein and Rodney Hooper at RK Equity for plenty of evidence. In fact, you can also hear Roger Atkins referencing Mr. Lithium on this topic in a Cleantech Talk podcast interview with him back in 2019. I am genuinely surprised that Elon doesn’t seem to have lithium anticipated prices going up like this, but whether he did or not, it’s clear that the lithium market has hit the stage lithium experts have been predicting for years it would hit. How long until the market truly responds and starts “minting money” enough to get supply to match demand (in which case the profits won’t be so dramatic)? —Zach Shahan
One thing to take note of is that Elon Musk said that Tesla would need to help the mining industry in this regard. This is also echoed by Tesla’s recent moves in hiring a geologist and filling roles related to critical minerals and the supply chain. This aligns with Tesla’s mission, as Drew Baglino, Tesla’s SVP, Powertrain, and Energy Engineering, pointed out.
“Our mission is to accelerate the transition of sustainable energy. So, we are working with our existing suppliers and others to figure out how to grow all of these raw materials as quickly as possible to not slow down the transition. And whether that means we have to get directly involved in some cases or not come down to the counterparts and their willingness to expand at the rate we think they should be able to expand. And that’s similar to what we’ve done with everything else.”
For some further background, here are our 2020 podcasts with RK Equity:
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