Commodities

How demand for electric vehicle has helped lithium gain the most this year

Subramani Ra Mancombu Chennai | Updated on March 15, 2021

The commodity has gained 82.80 per cent since the beginning of this year

Lithium topped rhodium last week as the commodity that has gained the most this year on strong demand from Chinese battery manufacturers following demand mainly from Europe.

Tight spot availability has resulted in prices spiking sharply to 85,000 Chinese yuan (₹9.50 lakh) a tonne. Metal Bulletin website said prices were up nearly three per cent last week, with lithium rising to 85,000-90,000 yuan (₹9.50 lakh-10.05 lakh).

According to the Trading Economics website, the commodity, which has been at the forefront of many technological changes since the 1990s with the commercialisation of lithium-ion batteries, has gained 82.80 per cent since the beginning of this year.

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Major component in batteries

Last week, many lithium carbonate companies in China such as Sichuan Rongli Technology and Qinghai Zhonghong Mining raised the prices of lithium battery materials. The hike makes up only 10 per cent of the additional costs these companies are having to shoulder, though.

Lithium is the primary component in lithium-ion batteries, which are behind the revolution in mobile phones, smart gadgets and tablets. Currently, it has come into focus with the increasing demand for electric vehicles (EVs) in the Western world.

Developing nations’ governments, particularly in Europe, have set targets to reduce carbon emissions by 2030 by phasing out vehicles running on petrol and diesel.

50 per cent EV growth

US multinational and financial services group Morgan Stanley sees a 50 per cent growth in EVs this year. Sales of EVs are particularly higher in Europe as the continent looks to decarbonise by 2030 by phasing out vehicles running on fossil fuels.

EV sales more than doubled in January this year, with total sales expected to top five million.

Lithium-ion batteries are preferred in EVs as they are rechargeable. Lithium-ion batteries make up over 50 per cent of the demand for the metal currently. The batteries are scalable and have higher energy density besides a longer life-cycle with lower maintenance.

How much an EV needs

An EV has nearly 5,000 battery cells and it could need, at the most, 10 kg of lithium. Thus, a tonne of lithium can help meet the demand for 90 electric cars.

Batteries in EVs are lithium-ion having many individual cells. About 60,000 tonnes of lithium carbonate equivalent are required to produce one million electric cars.

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According to Barrons, some 5.3 tonnes of lithium carbonate can help produce one tonne of lithium. From this, a few grams of lithium, equivalent to half a teaspoon of sugar, are used in the batteries of EVs.

Lithium, the lightest known metal and the least dense solid element, is preferred for batteries as it has got good electrochemical properties in view of a low melting point.

Mineral reserves

The commodity is extracted from minerals found in igneous rocks composed of large rocks (spodumene) or in water with a high concentration of lithium carbonate. Both processes contribute equally to lithium production today, though carbonate is the main source.

Lithium availability is a problem since global mineral reserves are about 80 million tonnes (mt) with Bolivia holding 21 mt, Argentina 17 mt and Chile nine mt, according to NS Energy Business.

Three other major sources of the mineral are the US (6.8 million tonnes), Australia (6.5 million tonnes) and China (4.5 million tonnes).

According to the Atomic Minerals Directorate for Exploration and Research, a unit of the Department of Atomic Energy, India has 1,600 tonnes of lithium resources in rocks in the Marlagalla-Allapatna region in Mandya district, Karnataka.

Chinese dominance

China is the top consumer of lithium, processing nearly 90 per cent of the total lithium hydroxide available globally.

Chinese automobile makers are investing more in increasing the capacity of electric vehicles.

In order to encourage the manufacturing of EVs, the Chinese government is extending subsidies to EV makers and Beijing is set to pass a new law to support the production of such new vehicles.

EV industry experts say that Chinese subsidies have either been equal to or higher than production costs, though they could end in a couple of years.

Subsidies

Subsidies for new EVs in China are likely to be cut by 20 per cent this year. Beijing extended a subsidy of ₹1.82 lakh-2.55 lakh for an electric car that had a driving range of 300 km last year.

China is also the largest supplier of batteries and EVs, apart from being the top producer of both. Beijing has increased its battery manufacturing capacity, thanks to its dominance in lithium refining. According to Austrade, China has improved its scale of economies also.

Chinese firm Tianqui is one of the few companies in the world that has access to high-quality lithium mines and salt lake brine mines. These abundant resources provide the company with low-cost lithium concentrates as raw materials for the production of lithium carbonate and lithium hydroxide.

South Korea and Japan have developed and fine-tuned battery manufacturing technology, but they rely on China for the supply of lithium.

Alternatives

Lithium hydroxide is an alternative to lithium carbonate and demand for it is increasing. Industry analysts expect lithium hydroxide demand to exceed that of lithium carbonate in view of research developments in battery technology.

Lithium hydroxide is seen as a better performer, increasing the performance and lifespan of batteries.

Producers extracting lithium from spodumene, a method that is on the rise, can use either carbonate or hydroxide process, those extracting it from brine use carbonate process.

A study in Spain has found that producing lithium hydroxide from spodumene costs lower than producing lithium carbonate from brines.

Published on March 15, 2021

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