“Mr. Lithium” Blames Permit Policy for Supply Woes
During TDK Ventures’ Energy Week 2022, I had an opportunity to host a fireside chat with the one-and-only Joe Lowry “Mr. Lithium” who has witnessed the rise of the global lithium industry in the past three decades. Lithium prices has been very turbulent during the past few years and Joe had shed some lights on the underlying dynamics that played into this. This article highlights key insights from our discussion. The full session is also available on Youtube.
“There’s plenty of lithium out there, but governments have to encourage mining and not condemn it,” says Joe Lowry, president of Charlotte, N.C.-based Global Lithium. “It’s not easy to get a project permitted, especially in the United States. That’s what has held the US back from getting into the game. Lithium is in the ground. The trick is getting investment and permission to extract it.”
Lowry, known in the industry as “Mr. Lithium” after founding Global Lithium to provide consulting and advisory services to suppliers, purchasers, investors, and governments around the world, delivered his opinions and insights in a fireside chat with Tina Tosukhowong, an investment director with TDK Ventures, as part of the corporate venture capitalist’s Energy Week 2022.
In explaining the element’s rapid price increase, Lowry noted that “lithium is subject to supply and demand, just like anything else.” The escalating demand and mandate for electric vehicles — almost all of which are powered by lithium-ion batteries — has sent demand and prices skyrocketing. It seems everyone wants to get their hands on lithium, even with the world’s lightest metal’s price tag hovering around $70,000 per ton.
“It used to be that everything you read (in the EV space) was about China and Tesla,” Lowry said. “Now, it’s everybody trying to jump into the game. It has put real pressure on lithium supply, and that’s going to continue for a long time.”
He said analysts who predict this cycle will run its course like other lithium price spikes are dead wrong.
“We have had price spikes before, but they were usually very short-lived and there would be a supply response,” he explained. If you look at 2005 to 2007 or early 2016 to 2018, those spikes came on the back of very low EV penetration. That’s not happening this time. Demand growth this year will be about equal to what total demand was in 2016. Unfortunately, the lithium industry is small; it’s dominated by a few players; suppliers are not able to quickly respond. Lithium is not iron ore.”
He blamed industry and government shortsightedness.
“Some people are panicking, and they should, because we didn’t have the investment over the last five years that we needed. You can build a battery factory in a couple of years. You can build cathodes quicker than that,” he contended. “But it takes sometimes a decade to bring a lithium-mine project online.”
Supply will eventually catch up, as huge profit prospects attract new industry entrants and entice current players to expand, but Lowry doesn’t think supply will match demand before the end of the decade, at least.
“It’s a small industry, and the top four players have over 60% of the supply. They can’t keep up. You need a lot more companies coming in. That is happening on paper, but you also have a situation where people want green energy and EVs, but a lot of these countries (including the United States) tend to not want mining. You can’t have it both ways, demanding 50% of cars be EVs in 2030 and then refuse to give permits to mining projects.”
As Lowry noted, the lithium marketed is concentrated, with the “big 4” exploiting brine resources in South America and China and hard-rock mines primarily located in western Australia. Albemarle tops the list. Headquartered in North Carolina, the company gets its lithium from both brine (salar de Atacama in Chile, Silver Peak, Nev.) and hard rock (Talison spodumene mine in Australia). Chilean-owned SQM also extracts lithium from the Atacama Desert and is developing a hard-rock asset with Westfarmers in Australia. Chinese companies Ganfeng and Tianqi get most of their lithium from domestic hard-rock sources.
Lowry explained that the cathodes in EVs can be made from lithium carbonate or lithium hydroxide. Lithium carbonate from the Atacama can be extracted and refined more cheaply than any other source when royalties are not considered, he said. But production costs are becoming irrelevant as prices rise and demand diminishes.
“Across the Andes in Argentina, they are, again ex-royalties, about $1,500 to $2,000 per ton higher,” Lowry said. “The Ching Hai assets in China are much higher because they are lower quality, have high magnesium content, and there’s a lot more weather issues.”
Lowry said the conventional wisdom is to use hard-rock sources when lithium hydroxide is the desired product.
“That’s true for the very best asset on the planet, Greenbushes (mine in western Australia),” he agreed. “They have the lowest cost position in hydroxide, but the next part of the cost curve will be the best brine guys, who then take sellable lithium carbonate and convert it into hydroxide. As you go out, the converters in China who have to buy spodumene (the most important lithium ore, with a concentration of about 6–7%) and convert it are at the high end.”
But even these low-grade sources deliver enviable profit in today’s market.
“It’s definitely not the lithium companies who are getting hurt from the demand crunch,” Lowry noted. “You can go back just a couple of years, when many of the legacy automaker CEOs were asked about lithium would say, ‘that’s not my problem; it’s the battery guys’ problem.’ But two years later, it’s the car companies’ problem because they can’t get the battery packs in large enough numbers to come out with all these announced vehicles.”
As a result, he said, big auto companies’ 2035 or 2030 targets for going all-electric, may turn out to be mere pipe dreams, “because they were myopic in thinking the supply chain would just magically appear. It hasn’t.”
Tosukhowong asked about lithium sources in the United States and around the world, and what has and may prevent their development in the future.
“The biggest problem up until the last couple of years was purely financing. Lithium projects couldn’t get funded, and that’s why so many have been out there for a decade,” Lowry said. “They didn’t have the capital to even start building. Now, it has become a permitting problem.”
He cited delays in permits and private-sector opposition to the commissioning of Thacker Pass in Nevada and Piedmont Lithium’s attempt to gain zoning approval for its mine in North Carolina.
Thacker Pass, on the McDermitt Caldera near Winnemucca, Nev., is billed as the largest known lithium resource in the United States. After passing a federal environmental review, it received a permit to begin mining operations. But protesters, including environmentalists, ranchers, and Native American tribes have gone to court in an effort to halt the mine’s development. Piedmont Lithium faces similar pushback as it hopes to open a mine west of Charlotte, N.C. Owners of property abutting the proposed mine pits are especially vociferous in their opposition. The delays have forced Piedmont to “go to an inferior resource in Canada and another asset in Africa,” Lowry said.
He said the market is also shifting in terms of output destination.
“If you go back a couple of years, China bought almost 100% of Australia’s spodumene output,” he explained. “Now, the Aussies (and the U.S. and other companies exploiting lithium resources Down Under) are building capacity, big projects to make conversion capacity in Australia. That’s all lithium that’s not going to China.”
Because most of the new battery factories are being built in North America and Europe, the added capacity gives Australia plenty of options about where its product goes.
“You have a company like Tesla saying it wants to build conversion on the Gulf Coast. There are a lot of conversion projects on the board in Europe. They all need hard-rock or carbonate feedstock from brine to build out those projects,” Lowry said. “There’s a real competition for lithium, which is why spodumene was selling for under $400 in the middle of 2020, and now contract prices are going up each quarter. Approaching $8,000 per ton.”
Lowry believes U.S. EV companies, including Elon Musk’s Tesla, missed the boat by not locking up current, accessible lithium reserves.
“Elon probably shouldn’t have bought Twitter. He should have bought Ablemarle and Livent and created a moat, as Warren Buffett likes to call it, that would have given him a huge advantage,” he said. “I think Tesla has missed a huge opportunity to get in early.”
He said Musk’s intimation that there is enough lithium just in Nevada to meet the needs of the U.S. EV industry “did more to create lithium demand and prevent lithium supply than anyone else on the planet. It had a negative effect on investment in lithium companies,” Lowry said. “And it’s just not happening.”
TDK Ventures’ second annual Energy Week assembled some of the greatest minds and brightest lights in the fields of renewable energy, materials science, mobility, storage, and more. Over the course of 13 sessions — fireside chats, panel discussions, spotlight interviews, and in-depth reports — TDK Ventures and the expert businesspeople, researchers, academics, and investors presented their opinions and field notes on the world’s progress in solving some of its most pressing problems. Energy Week 2022 fulfilled TDK Ventures’ mission to spotlight the best ideas and most promising technologies to inspire entrepreneurs, inventors, and investors to redouble their efforts to mitigating climate change, hasten electrification, and develop the solutions that will herald a greener, more equitable planet.
