Lithium – an over- hyped commodity?

By Laura Syrett
Published: Friday, 27 February 2015

Lithium has been one of the poster minerals of the green energy revolution, but slower than expected growth in EVs and other battery applications has put a dampener on the industry. IM examines lithium’s rise to prominence and discusses whether the element will be able to fulfil the expectations of its advocates.

Johan August Arfwedson, the Swedish chemist who discovered lithium in 1817, probably would not have believed it if he had been told that this element would one day become synonymous with what has been widely touted as a revolution in 'green’ energy.  

With traditional uses in greases and ceramics, lithium is the lightest metal on earth. Its electrochemical potential also makes it one of the best raw material candidates for a high energy density, lightweight batteries. Lithium’s trajectory started to change in 1991 when the first commercial examples of lithium-ion (Li-ion) batteries were introduced into the market. 

Its popularity jumped in 2008 when Li-ion batteries were accepted as better alternatives to heavy lead acid batteries for use in electric vehicles (EVs).  Although some automakers had tested and produced a small number of cars using Li-ion batteries prior to 2008 (Nissan’s Almera Tino Hybrid and Toyota’s Vitz CVT4, for example), the first highway-capable all-electric vehicle powered by Li-ion batteries, the Tesla Roadster, did not roll off the production line until 2008. 

Following Tesla’s lead, several other automakers that year picked up on the technology’s appeal as a cleaner alternative to petrol and diesel-powered vehicles and started to announce plans for their own plug-in hybrid (PHEV), hybrid (HEV) and EV models using Li-ion batteries. 

2008 was also the year that saw the start of the boom in lithium mining and exploration. Although estimates show that only 0.2% of the lithium produced worldwide went to automobile batteries in 2008, numerous market commentators and analysts were already publishing optimistic estimates for future lithium demand from this market. 

One such outlook, published by Meridian International Research in a 2006 paper entitled "The trouble with lithium: Implications of future PHEV production for lithium demand", posited a scenario where 60m cars produced worldwide were made as PHEVs, with each vehicle using a 5kWh Li-ion battery. According to his calculations, this would require six times the total world production of lithium carbonate in 2006. 

He also suggested that as larger battery capacities became needed, this would increase demand to 10 times world production and concluded that world lithium reserves were not sufficient to satisfy this projected consumption. 

In 2009, a report by Dundee Securities – "Lithium - Hype or Substance? A look at Lithium Demand and Supply" – assumed that electric-type cars would account for 35-48% of new vehicles by 2020, representing lithium carbonate demand of around 150,000-220,000 tonnes. 

These optimistic projections notwithstanding, the report’s authors concluded that lithium supply would be sufficient to meet future consumption and did not anticipate any shortage before 2019. 

The lithium boom

Whether because of these hopeful forecasts for EV penetration, underestimation of lithium supply or the promises made by automakers for new electric car concepts, investors and prospectors took their cue from the speculation to initiate a surge in new lithium project developments.  

The table on the previous page shows a non-exhaustive list of companies that have entered the lithium exploration industry since 2006. The majority of these companies are now active as either early stage explorers, near-term developers or developers. 

The far right hand column in the table shows the year that each the company started exploring for lithium. Despite the global economic recession which began in 2008 and the fact that the lithium demand decreased in 2009, most of the companies listed started looking for lithium in either 2008 or 2009. 

It is also interesting to note that a number of the firms were exploring for other commodities under different names before switching or broadening their focus to lithium. 

Among the early projects listed, Rio Tinto’s lithium property in Serbia is one that has garnered special attention. Rio Tinto announced the discovery of a new mineral called jadarite in 2007, after Serbian and US geologists identified the lithium-bearing deposit in 2004.

Jadarite contains around 7% lithium oxide (Li2O) and is so far known to exist only in Serbia. Based on its exploration findings, Rio Tinto claims that Serbia has the potential to supply a significant percentage of the world’s lithium requirement, plus about 10% of global demand for borates, as it contains 47.2% B2O3

This announcement prompted a moderate lithium-rush to the country by juniors between 2009 and 2010 (see table), although there has been relatively little new information on the country’s lithium potential in the last few years.

Looking ahead for lithium

With EV penetration in the automobile market looking disappointingly slow to materialise and green car sales currently under pressure from low oil prices – which make petrol-powered vehicles more economically attractive – a question mark hangs over lithium demand in the coming years. 

Is the world really facing a future scarcity in lithium or will the surge of new projects result in a supply glut? Edward Anderson, president of US and Canada-based industry consultants TRU Group Inc., believes that lithium is an overhyped commodity. 

In a comment on the lithium industry released in November 2014, Anderson said: "Probably more than a billion dollars have been lost by investors on waning listed lithium-juniors. Some of this was due to the hype stirred-up largely by promoters." 

Anderson also blamed the demise of investment advisors, Toronto-based Byron Capital Markets, which announced that it was being wound up in May 2014, on its misjudged advocacy of lithium as a savvy investment commodity. 

Anderson also predicted that the lithium industry will face an oversupply situation by 2020, that prices will remain broadly stable, rather than rising as companies working in the lithium exploration sector have suggested. 

Others have also warned that there is more hype than hope behind lithium’s growth expectations1.

Although the announcement by Tesla Motors in March 2014 (see p29) that it plans to build a Gigafactory in Nevada to produce half a million Li-ion batteries by 2020 (potentially consuming 15,000-25,000 tpa lithium carbonate) reignited interest and expectation in the lithium sector, the market is still facing a slower than expected rate of growth in the EV market.

This tempered growth outlook is now mostly understood by both analysts and the lithium industry, with most recent studies agreeing that there is unlikely to be a shortage in lithium supply, at least in the short and medium term.

Table: Companies worldwide exploring for lithium

Company

Project location

Exploring for
lithium since

European Lithium

Austria

2014

Cobre Montana NL

Australia

2014

Lithium Exploration Group Inc.

North America

2013

SolarWorld

Germany

2012

Houston Lake Mining Inc.

North America

2011-2012

Ero Mining Ltd

Australia

2011

Stria Lithium Inc.

Canada

2011

International Lithium Corp.

South and North America

2011

Critical Elements Corp.

North America

2011

Lithium Americas Corp.

South America

2010

Nemaska Lithium Inc.

North America

2010

Pan Global Resources Inc.
(formerly Mosam Capital)

Serbia

2010

Altura Mining Ltd

Australia

2010

Glen Eagle JV Globex Mining Ent. Inc.

North America

2010

Perilya Ltd

North America

2010

RB Energy Inc. (formerly Canada Lithium)

North America

2009

RockTech Lithium Inc.

North America

2009

Ultra Lithium Inc. (former Jantar Resources)

North America/Serbia

2009

Lithium One (acquired by Galaxy Resources – formerly Coniagas Resources Ltd)

South and North America

2009

Li3 Energy Inc.

South and North America

2009

Landore Resources Ltd

North America

2009

Neometals Ltd. (former Reed Resources)

Australia

2009

Nortec Minerals Corp.

Finland

2009

Traka Resources Ltd. JV Galaxy Resources Ltd.

Australia

2009

Lithium Corp.

North America

2009

Dajin Resources Corp.

South and North America

2009-2010

Bacanora Minerals Ltd. JV Rare
Earth Minerals Plc.

Mexico

2009-2010

New World Resources Corp.

South America

2009 (till 2014)

Rodinia Lithium Inc.

South and North America

2008

Western Lithium USA Corp.
(former Western Uranium)

North America

2008

GlobeStar Mining Corp.
(taken over by Perilya Ltd.)

North America

2008

Rio Tinto

Serbia

2007

Galaxy Resources Ltd

South and North America, Australia

2006

 


1 See: Jascha Forster, "A Lithium Shortage: Are Electric Vehicles Under Threat?", Energy Economics and Policy Lecture, Swiss Federal Institute of Technology Zurich, May 2011.

Zhuo Zhang and Richard Jun Li, "Hype vs policy: The Chinese market for lithium batteries", State of the market report, Lux Research, July 2013