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Scarcity and Growing Demand Boost Lithium Prices

Driven by rising sales of lithium-reliant electric vehicles, environmental opposition and Chinese competition, the demand for lithium is poised to overtake global supply, prompting a surge in prices, according to The Wall Street Journal (subscription).
The quest for rechargeable power: Rechargeable batteries are starting to power everything from smartphones and power tools to electric vehicles—but while the world has plenty of lithium, establishing reliable and consistent conversion of lithium into battery-grade chemicals requires extensive investments in time and capital. Currently, most lithium comes from countries such as Argentina and Chile, where it is derived from a salty brine pumped out of the ground and spodumene, a mineral found in hard rocks.
The price surge: Lithium supply has been stopped up by supply-chain bottlenecks as well as a recent bear market. The price surge is also driven by bets on continued scarcity and consistently high demand for electric vehicles. The mad scramble for lithium is particularly worrisome for battery manufacturers and automakers, which need adequate manufacturing material.
Looking back and ahead: “The challenge for lithium producers is that it takes many years and heavy investment to get projects off the ground, creating mismatches between quickly growing supply and demand. Prices soared in 2017 and 2018, only to fall rapidly after companies ramped up output. Some analysts expect a similar pattern to play out this time, but only if producers increase capacity and sentiment cools off.”

  • Growing investment in the lithium sector could mean greater supplies in the future, easing the lithium rush—but demand is likely to outpace supply through 2025 until production capacity catches up.  

The China factor: The United States is facing significant competition from China, which has a robust lithium chemical processing and battery production industry. As the U.S. seeks to build up a strong domestic counterpart, they will have to face off against China’s low costs and expertise.
A shifting environmental picture: Environmental opposition to lithium extraction presents considerable challenges for global lithium processing, delaying production, crunching supply and lifting prices—even though according to some analysts, lithium production plays a key role in the decarbonization of the economy. The cumbersome permitting process remains an obstacle to solving the supply-demand mismatch.

What we’re saying: “We can’t have it both ways: If we are serious about tackling climate change, then we can’t afford to cripple ourselves with outdated permitting,” said NAM Vice President of Energy and Resources Policy Rachel Jones. “It currently can take decades to obtain regulatory approvals for mining or processing investments—far longer than in other advanced countries. While well intentioned, the U.S.’s complicated, multilayered permitting regime acts as a significant barrier to developing new industries in America and a disincentive to onshoring. U.S. policymakers can modernize and strengthen permitting by encouraging early engagement and open collaboration among permitting authorities, as well as taking steps to speed the delivery of permits and limit litigation—while at the same time continuing to protect our environment.”

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