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Lithium Availability: Challenges & Concerns

Tesla’s Investor Day and Long-Term Lithium Availability

Elon Musk’s remarks at Tesla’s Investor Day in 2023 have sparked worries regarding the accessibility of lithium in the near, medium, and long term. Investors were left feeling uneasy after Musk failed to instill confidence on the matter. During the Investor Day event, Musk indicated that the bottleneck in the supply chain lies in the lithium refining process, rather than the availability of lithium bearing raw-material.

However, the underinvestment in the mining sector has caused an imbalance between supply and demand, leading to increased prices and significantly higher profits and margins on the mining side, which is in contrast to Musk’s suggestion that the bottleneck lies primarily in the lithium refining process rather than in raw material availability. This statement raises several questions about the complexities of the battery supply chain, potential bottlenecks, and possible supply shortages that could arise in the future.

Lithium Production Cost Breakdown
Lithium Production Margins by iLi Markets – Credit @D_Jimenez_Sch

Geopolitical Factors and the Lithium Supply Chain

The battery supply chain involves several steps, starting with mineral extraction and concentration, which is then shipped to China for lithium refineries to go through chemical processing. The lithium is then sent to cathode and battery cell manufacturers, and the process involves several potential bottlenecks and supply shortages. Defective cells, inventory needs, logistics, and travel times all contribute to the complexity of the supply chain.

Furthermore, geopolitical factors also play a role in the lithium supply chain. China has been the dominant player in the lithium processing industry, with almost all of the spodumene concentrate being shipped to China for processing. However, the rest of the world is starting to control the flow of spodumene away from China, which could further complicate the lithium supply chain.

The Growing Demand for Lithium

Lithium demand is growing rapidly, and it is estimated to be between 200,000-300,000 tonne LCE per year, which was the total global supply around three years ago. However, there are delays in permitting, construction, and ramp-up issues, as well as a lack of upstream investment. OEMs do not want to mine, and the narrative that “lithium is everywhere” contributes to the lack of investment upstream.

Ensuring Long-Term Lithium Availability

In conclusion, Tesla’s comments on long-term lithium availability highlight the complexities and challenges involved in the battery supply chain. The process involves several potential bottlenecks and supply shortages, and the lack of upstream investment and OEMs’ reluctance to mine further exacerbate the situation. Nevertheless, geopolitical factors, such as China’s dominance in the lithium processing industry, further complicate the situation.

It is clear that significant upstream investment is needed to ensure the long-term availability of lithium and other materials required for the lithium-ion battery supply chain. The complexity of the supply chain requires coordination and collaboration between industry players, governments, and other stakeholders to address the challenges and ensure a sustainable and secure supply of lithium.

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