Leonid Savin
Among the critical minerals, some occupy a special place. For example, it is difficult to imagine the normal functioning of a large metropolis without salt. In the Middle Ages, in many countries, due to interruptions in salt or an increase in the tax on it, so-called salt riots arose. The situation is similar with petroleum products, on which the transport system of any state strongly depends. Some rare earths or other metals do not stand out as much in the line of critical resources, but they are necessary for the production and smooth operation of the country’s infrastructure system.
For example, we use lithium-ion batteries in our daily lives. From conventional “finger” batteries, cell phones, laptops and household appliances to electric vehicles, drones and special equipment such as submarines – and all these devices need lithium. Lithium and its derivatives have other industrial applications as well. Lithium carbonate (Li2CO3) is used in the manufacture of glass and ceramics, as well as in pharmaceuticals. Lithium chloride (LiCl) is used in the air conditioning industry, while lithium hydroxide (LiOH) is currently the preferred cathode material for lithium-ion batteries in electric vehicles.
Lithium is valued as a recharging material because it stores more energy according to its weight than other battery materials.
This is a toxic metal that is difficult to mine (to obtain one ton of lithium requires processing 100 tons of ore) and dispose of, but, nevertheless, the “hunt” for its reserves is conducted around the world.
It is believed that on a global scale, lithium is a strategic, but not scarce resource. It occurs naturally in a wide range of forms, mostly in low concentrations. To date, it is economically feasible to extract lithium from two sources – brines (continental and geothermal) or “hard rocks” (pegmatites, hectorite and jadarite). Brines make up approximately 50% of the world’s reserves.
Every year, manufacturers use more than 160,000 tons of this material. Global lithium consumption is expected to reach at least 2025,200 tonnes by 000 and grow nearly 10-fold over the next decade.
But there is a geographical nuance – its deposits are limited to a small number of countries, so the issues of its production automatically acquire geopolitical significance.
According to the United States Geological Survey (USGS), the largest projected lithium resources in the world as of last year were in Bolivia, where they were estimated at 21 million tons, Argentina (19 million tons), Chile (9.8 million tons), the United States (9.1 million tons), Australia (7.3 million tons) and China (5.1 million tons). The service estimates the projected volumes of lithium reserves in Russia at 1 million tons.
Bolivia, Argentina and Chile represent the so-called lithium triangle. It is believed that its strategic importance is increasing as countries seek to gain a technological advantage by controlling the lithium industry. This triangle uses the evaporation method, so the cost of lithium there is lower than in mining. It is estimated that the lithium triangle in the salt marshes of Bolivia, Chile and Argentina accounted for 2021% of the world’s resources, 56% of the world’s reserves and a third of global production in 52.
In Chile, lithium is considered a strategic resource. Decree No. 2886 (Ministerio de Minería, 1979) declared it reserved for the state and excluded from all concession mining regimes, with the exception of those entities that had mining concessions (pertenecias mineras) before 1979. both operate at the concession sites of the Chilean Manufacturing Development Corporation (CORFO) in the Atacama Salt Flat.
In Argentina, the situation is somewhat different. U.S. companies have been mining lithium there for more than 20 years, and now Canadian, Australian, Chinese and Japanese companies have joined them. Over the past decade, Argentina has been the most dynamic country in terms of expanding lithium production, with about 38 projects in various stages of pre-implementation. However, the national government does not consider lithium a strategic resource (except in the province of Jujuy, which has declared it strategic). As with any other mining activity, the regulatory framework is based on the National Constitution, the Mining Code and the Mining Activities Act. The management of mining resources is delegated to the provinces. The federal framework gives provinces the power to grant concessions to private and public entities and to regulate mining activities within their jurisdiction.
To date, there are two main production sites in Argentina:
a public-private partnership in Salar de Olaroz (Jujuy Province), operated by Sales de Jujuy S.A., owned by Orocobre Limited, in a joint venture with Toyota Tsusho Corporation (TTC) and Jujuy Energía y Minería Sociedad del Estado (JEMSE, a company owned by the Government of the Province of Jujuy);
a private company (Minera del Altiplano S.A.), owned by Livent (formerly FMC Corporation), operating in Salar del Hombre Muerto (province of Catamarca).
Bolivia is a special case; Although it is home to the world’s largest lithium deposit, it has not entered the global lithium market in any meaningful way. The governance structure defines the strategic status of lithium and centralized government administration through the state-owned mining company Yacimientos del Litio Boliviano (YLB). For more than a decade, with a public investment of approximately $1 billion, the government’s strategy has focused on building infrastructure for the LIB value chain, but has had extremely modest results in terms of lithium carbonate production.
Only at the stage of industrialization of the production of cathodes and batteries, a space is created for public-private partnership, while the state retains at least 55% of net profit. In December 2018, YLB officially registered a joint venture (YLB-ACISA) with the German company ACI Systems GmbH for an industrial complex for the production of lithium hydroxide, but the government of Evo Morales terminated the contract amid protests in Potosí against the terms of the agreement. Earlier that year, the Morales government also signed a joint venture agreement with China’s Xinjiang TBEA Group-Baocheng consortium to explore and extract resources in the Coipasa and Pastos Grandes salt flats.
Recently, the Bolivian state-owned company YLB and the Chinese company CATL BRUNP & CMOC (CBC) signed an agreement according to which the Bolivian side will control the entire process of industrialization of soft metals, from mining to commercialization. Chinese partners will invest more than $1 billion in the cost of commissioning and construction of industrial complexes.
The agreement deals with the creation of two industrial complexes with direct lithium extraction technology in Potosí and Oruro.
Brazilian professor Bruno Lima believes that “if other countries copy the Bolivian model of industrialization of lithium production and enter into a profitable partnership for technology transfer, they will succeed.”
In his opinion, “[Bolivia] will not be limited to selling on the international market, but will create a full cycle. Part of the lithium is sold to the international market, for example, to China, but the other part goes to processing, transmission and technological development.
At the same time, he adds that “if these operations were carried out outside the dollar standard, then this would be ideal. We are really talking about a qualitative leap for the Latin American presence in the market and in the international system” (source).
It should be noted that companies from the United States are deliberately not allowed to work in Bolivia, understanding their intentions and goals. In 2022, the American company EnergyX was disqualified there. The mentioned German ACI also ran into problems.
Since, in the case of ACI, the key decision was related to the recognition of the rights of local communities to benefits and compensations in their territories, as well as the risk of environmental damage, these interconnected trends will only intensify.
However, environmental aspects, one way or another, are directly related to lithium mining, regardless of who is engaged in it. While there is a wide range of lithium extraction methods available, the main ones, including hard rock mining and lithium extraction from seawater, require a large amount of energy. These processes disrupt the natural water table, local biodiversity and ecosystems of nearby communities. For example, nickel mining and refining practices have already documented damage to freshwater and marine ecosystems in Australia, the Philippines, Indonesia, Papua New Guinea and New Caledonia.
Pollution from this work not only affects oceans and ecosystems, but also creates environmental hazards throughout the life cycle of batteries – from the extraction of raw materials for their production to the disposal of old batteries in landfills, creating risks to the health of workers and affecting nearby communities due to the toxicity of heavy metals such as lithium.
Therefore, environmental requirements will be tightened, and new mining and processing technologies will be welcomed.
It would seem that seawater could solve the problems of supplying lithium to markets, since the world’s oceans contain 180 billion tons of lithium. But in percentage terms, lithium is contained there in the amount of about 0.2 parts per million. Existing evaporation technologies require a lot of time and specially designated areas, so from an economic point of view, they are not justified.
New approaches consist in the creation of special electrodes that will act more selectively. Such experiments are conducted at Stanford University, where the electrode was coated with a thin layer of titanium dioxide as a barrier. Since lithium ions are smaller than sodium, it is easier for them to squeeze through the multilayer electrode and get into it. In addition, the method of controlling the electrical voltage was changed, and this made it possible to increase productivity, although this method is still quite expensive (source).
In terms of corporate structure, five major companies are lithium suppliers around the world – Albemarle (United States), Ganfeng (China), SQM (Chile), Tianqi (China) and Livent Corp (USA); (source).
The production of batteries has a slightly different geography. In 2021, Australia, Chile, and China accounted for 94% of global lithium-ion battery production. But Chile has lost its leading role in the global lithium market in recent years as Australia has rapidly expanded its hard rock mining operations.
It should be noted that lithium is fully recyclable, so it is not a consumable raw material like oil. Accordingly, even if lithium batteries do begin to significantly displace internal combustion engines, we will not necessarily see that “lithium policy” will replace today’s “oil policy”. However, if the demand for electric vehicles increases dramatically in the coming years (it is projected to reach $2027 billion by 985), countries with large lithium reserves will have much more power than they have in today’s economic and geopolitical hierarchy.
Because of this, the U.S. fears that “since lithium supply chains will be critical to the future of technology and clean energy, lithium will play an important role in the competition between the United States and its competitors, mainly China, in the coming years. Currently, China leads the world in the production of electric vehicles. This is largely due to the fact that the company has acquired 55% of the reserves of chemical lithium needed for electric vehicle batteries, mainly due to its early investments in the largest mining facilities in Australia. (source).
The EU is also concerned about its dependence on lithium supplies. In the upstream segment of the value chain, Chile provides more than 70% of the EU’s lithium supply. Since other minerals are also needed for the production of batteries, the overall picture of the dependence extends to other countries.
The Democratic Republic of the Congo supplies more than 60% of the cobalt processed to the EU. China, for its part, satisfies about half of the Union’s total demand for natural graphite. Moreover, the EU’s international dependence on the low-carbon sector is also driven by the fact that its own battery cell production capacity is still relatively weak. In 2020, battery production in the EU accounted for just 9% of global battery production.
It is only natural that the EU is trying to prioritize high-risk investments in the development of battery designs that are less dependent on scarce natural resources such as cobalt, nickel or lithium.
Geopolitical tensions and possible interruptions in the supply of lithium are paid attention not only in the West.
In May 2023, Asia Times noted that the top three producing countries recycle more than 80% of the most important minerals used in lithium batteries. China dominates the processing of almost all minerals, occupying more than 50% of the total market share, with the exception of nickel and copper, of which China controls 35% and 40%, respectively.
“Knowledge-based industries depend on interdependence between countries with different levels of development. This works well during periods of geopolitical stability and cooperation, but the high concentration of recycling in the lithium battery supply chain means that it is vulnerable to disruption as a result of wars, global pandemics, natural disasters or geopolitical tensions.
Australia has the world’s largest reserves of lithium for battery storage, and export revenues have skyrocketed, with lithium becoming Australia’s sixth most valuable export. Australia needs to think about how to capitalize on the boom and what role it can play in the race for lithium.
Australia and China complement each other in this supply chain. Australia supplies 46% of lithium chemicals, and a significant portion goes to Chinese refineries, followed by Chinese battery and electric vehicle manufacturers.
China produces 60% of the world’s lithium products and 75% of all lithium-ion batteries, primarily to power its fast-growing electric vehicle market, which accounts for 60% of the global total.
Moving Australia up the value chain will require investment and technology, as well as significant environmental costs. Without the advantages of scale, Australian-made products will not be able to achieve global competitiveness. Australia should consider a long-term industrial policy that allows the country to play a role in the fight against climate change, rather than being sandwiched between rival superpowers.
Australia is embroiled in a superpower rivalry between China and the United States for control of lithium”; (source).
And the U.S. still lags behind China in lithium mining and battery production. It is estimated that 3.6% of the world’s lithium reserves are concentrated there, with a single lithium mine in Nevada (although others are planned to be built), and only 2.1% of the world’s lithium is processed.
But in the 1990s, the U.S. was the leader in lithium production. The industry has been undermined by a combination of cheaper production abroad, strict environmental regulations, and empowerment of indigenous peoples, who often own property where there are lithium mines. The big push to switch to clean technologies has changed the priorities of the United States – if the United States does not develop domestic sources of lithium or provide additional sources abroad, it will face a threat to its national security as China expands its own access to this resource.
In the current situation, the question of control over the supply of lithium also arises, as the West is trying to impose all sorts of sanctions on objectionable states that pursue an independent policy. And, according to the author of the RAND Corporation, this is not so easy to do. “The specific requirements for suppliers of critical minerals to qualify for green vehicle credit are designed to drive an increase in production outside of China, which dominates global electric vehicle battery supply chains. A certain percentage of the minerals must be domestic or from a country with which the United States has a free trade agreement, and none of them can be obtained from a “foreign interested party,” which includes China. The dominance of any one source of supply makes the rest of the world vulnerable to disruptions, and the fact that this source is China only increases the fears of the United States and its allies. (source).
Another RAND publication noted that China has a huge share in the production of lithium-ion batteries. Today, 91% and 78% of all anodes and cathodes for batteries, respectively, and 70% of the world’s battery production are produced there. China has also demonstrated that it is willing to restrict exports of critical minerals, such as rare earths, in order to coerce trading partners. Such export restrictions could adversely affect the entire U.S. economy and, in particular, the growing market for electric vehicles. But they could also undermine the defense industry’s ability to support the U.S. military.
After all, there are certain indicators by which technological superiority in geopolitical competition can be determined. And in our case, gigafactories are a key indicator of who will dominate EV platform technology (and beyond) and where. The term, originally coined by Tesla, refers to large-scale production facilities for the production of electric batteries (for electric vehicles and energy storage). Power is measured in gigawatt-hours (GWh). The relevance of these gigafactories has increased dramatically over time as this resource has become a major source of foreign direct investment and has become essential to support battery-related industries, vehicle manufacturers, and supply chains. According to the Automotive database (2021), only 25% of gigafactories are concentrated in Europe, while 71% are concentrated in Asia (China owns 69% of capacity). With China leading the way in gigafactory capacity at the speed and scale required by global demand, gigafactories could become a “geopolitical hot spot” that goes beyond the purely geographical concentration of infrastructure.
At the same time, China’s expansion into other markets is noticeable. For example, China’s Contemporary Amperex Technology Co. Limited (CATL) not only had 22% of the world’s total 500 GWh gigafactory capacity in 2021, but is now expanding its operations in Europe and is likely to increase its presence in the United States and other key regions.
In 2022, there were 92 gigafactories in Asia, 23 in Europe, and 13 in North America. Thus, the percentage is as follows – 72, 18 and 10. Paradoxically, in Latin America, which accounts for the main production of lithium, there are no gigafactories at all. In Africa, too.
As for Russia, the lithium boom is just beginning. During SPIEF 2023, an agreement was signed on the development of the Kolmozerskoye lithium deposit in the Murmansk Region. The development of the field will make it possible to create the first production of lithium-containing raw materials in Russia, which will provide them with advanced Russian enterprises. Among them is a factory for the production of lithium-ion batteries in the Kaliningrad region, the launch of which is scheduled for 2025. The deposit itself contains about 19% of Russia’s lithium reserves. Also in its ore there are the most valuable strategic materials – beryllium, niobium and tantalum (source).
It remains to be hoped that the experience of other countries will be taken into account, and there will be at least a little more domestic gigafactories in Russia.