Lithium supply will struggle to keep up with booming electric vehicle demand in the US and abroad over the next few years, and steps will need to be taken to incentivize additional production and exploration of the battery metal, according to Piedmont Lithium CEO Keith Phillips.
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"When people talk about 20% EV penetration by 2025, there might be a zero chance that could happen because there is no way the raw material supply will be ready," Phillips said in an interview with S&P Global Platts.
Phillips said he sees EV demand going "vertical" by 2025 as consumer sentiment drastically shifts away from traditional cars with internal combustion engines.
"Everybody who wants to buy a car is going to want an electric car," he said. "Internal combustion cars will be inferior from a performance perspective, cost perspective and environmental perspective... it will be irrational for anyone to want to buy an internal combustion car."
Car manufacturers will not be able to produce EVs at a rate that satisfies demand, and chemical companies will not be able to provide adequate amounts of lithium for batteries, according to Phillips.
"Between the car companies and the government, there is going to have to be action taken to incentivize the production of these critical materials and the development of the assets -- not only those like ours that are already identified and quite advanced, but also the exploration to go find more," Phillips said. "There is probably enough lithium in the world in terms of quality projects that are being pursued to get us to about 10% or 15% EV penetration, but the resources haven't even been discovered yet to pass that."
With its lone project -- vertically integrated spodumene-to-lithium hydroxide operation -- in North Carolina, Australia-based Piedmont is relocating its corporate headquarters to that US state. The company's spodumene concentrate mine operation and lithium hydroxide plant are expected to potentially come online within the next two to three years.
Piedmont plans to produce 160,000 mt/year of spodumene concentrate and 22,700 mt/year of lithium hydroxide once operations begin.
Spodumene-to-hydroxide supply brings advantage
Phillips said many battery and automotive customers are increasingly requesting lithium hydroxide over lithium carbonate as the chemistry of choice for EV applications. Furthermore, some vehicle manufacturers prefer spodumene as a raw material supply feed for lithium extraction as opposed to other sources, he added.
"There is still very much a market for carbonate and that market will grow, but it won't grow as fast as hydroxide," he said. "Many customers have also expressed very clearly to us their preference for spodumene as a feedstock for hydroxide relative to other materials like brine or clay or anything else. BMW and Volkswagen have quite publicly stated that from a sustainability perspective."
Piedmont entered a deal in September 2020 to supply Tesla with spodumene concentrate for an initial five-year period starting between July 2022 and July 2023. The deal covers about one-third of Piedmont's planned 160,000 mt/year spodumene output.
Phillips said spodumene-based lithium operations have greater potential for commercial scalability, and many current projects are located in geopolitically stable regions with suitable infrastructure.
Conversely, some other global operations obtain lithium from brine or have recently discussed extracting lithium from clay deposits. Phillips added that brine sources tend to be in difficult locations that lack adequate infrastructure, and production of lithium from clay deposits has not yet been commercially proven.
Focus on domestic supply
The onset of the coronavirus pandemic in 2020, and the resulting disruptions to global supply chains, has also stressed the importance of developing North America's domestic battery metals supplies based on reliable projects in the region.
"Battery-qualified lithium chemicals and those that can produce those materials, particularly in geographies like ours, should be in a very strong position, and I thinks that's inevitable in the next two, three or four years," Phillips said.
To expand its presence in North America, Piedmont recently acquired a minority stake in Sayona Mining, which owns a prospective spodumene project in Quebec. Sayona will supply Piedmont with at least 60,000 mt/year of spodumene concentrate starting in 2023 or 2024 as part of the acquisition.
"Our mission there is we want to be a bigger player in the spodumene business, and part of that deal was to secure the investment in that business so we could have spodumene supply come to us and build a bigger chemical plant," Phillips said. "We will continue to evaluate opportunities to do more things like that and make our business even bigger."
Phillips said several companies were working diligently to develop their North American projects, but Piedmont has already achieved many necessary milestones to bring it close to production.
"Every company is doing their best to advance their project and get it through the engineering process, the permitting process and the funding process, and we are pretty advanced in those processes," he said. "We are one of the more advanced projects, and I think we are all watching with interest to see what comes out of Washington [the Biden administration]."
Prices must rise to support US lithium development
Phillips said further lithium development will also be dependent on a rise in prices over the near-term.
"I do see prices going higher, and I do not think it will be two or three years out," he said. "I think it has to be sooner because without the prices going higher sooner, people will not be able to fund the development of their projects."
Platts assessed battery-grade lithium hydroxide at $9,000/mt Jan. 29 on a CIF North Asia basis, referring to deliveries to the main ports of China, Japan and South Korea. The price was unchanged from Jan. 8, the first assessment of 2021, and down from $9,500/mt on Jan. 3, 2020, the first assessment of 2020.