Speaker 1: This is Dana Perkins and you're listening to Switched on
Speaker 1: the b and EF podcast. On today's show, we're taking
Speaker 1: a look at a metal that is integral to the
Speaker 1: majority of electric vehicle battery chemistries and it is therefore
Speaker 1: one of the most in demand medals. That's lithium. Last
Speaker 1: week there were a couple of new discoveries of lithium deposits,
Speaker 1: both in the United States and in the Czech Republic.
Speaker 1: It's clear that countries around the world are looking to
Speaker 1: find this important metal, but what about refining well, Currently
Speaker 1: that part of lithium's supply chain is dominated by one country.
Speaker 1: And then what about the companies involved in this space.
Speaker 1: While there is a small list of dedicated mining companies
Speaker 1: that are on the case. On today's episode, I speak
Speaker 1: with two analysts from Benof's London office who know a
Speaker 1: thing or two about lithium. One is a metals and
Speaker 1: mining analyst, Elie Gomaskalis and the other from our batteries team,
Speaker 1: Andy Leach. Together we discuss where lithium is found, along
Speaker 1: with the different forms it takes, how it's mined, and
Speaker 1: the ecological impact of the different processes, as well as
Speaker 1: why the majority of major diversified miners might be avoiding
Speaker 1: this metal, and which nations are controlling the supply and refining. Lastly,
Speaker 1: we come to the relationship between lithium and different battery
Speaker 1: chemistries and whether or not sodium ion batteries could pose
Speaker 1: a threat to its dominance. If you'd like to learn
Speaker 1: more about lithium, BNIF subscribers are able to access the
Speaker 1: links that are included in the show notes, which relate
Speaker 1: to different b and EF research that's found on BNF
Speaker 1: dot com. As always, if you like this podcast, make
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Speaker 1: Podcasts or Spotify and will make us more discoverable. But
Speaker 1: right now, let's come to my conversation with Ellie and
Speaker 1: Andy about lithium. Ellie, thank you for joining today.
Speaker 2: Thank you for having me, Dana.
Speaker 1: And nice to see you as well.
Speaker 3: Andy, thank you for having me.
Speaker 1: All right, let's start with the history lesson part of this.
Speaker 1: So lithium, I want to know when did I mean?
Speaker 1: It's definitely something that many people who are listening today
Speaker 1: we are aware of this metal. We are aware that
Speaker 1: is critical for batteries, but when did the use case
Speaker 1: for lithium really take off and essentrally, are we competing
Speaker 1: with another incumbent industry or did batteries put lithium on
Speaker 1: the map.
Speaker 3: So lithium has had a number of uses over the years.
Speaker 3: It's been used in the past as a medicine for
Speaker 3: mental health issues, It's been used in glasses and ceramics.
Speaker 3: But since nineteen ninety one it's been used as a
Speaker 3: battery material. And nineteen ninety one was when Sony first
Speaker 3: commercialized lithiumine batteries, and they use lithium cobo oxide as
Speaker 3: their cathoide material. And since then batteries have grown their
Speaker 3: demand segment and as a consequence, they're now very much
Speaker 3: the main demand use for lithium.
Speaker 1: So consumer electronics really make lithium in some respects a
Speaker 1: household name or at least a piece of many household
Speaker 1: products that we're very aware of and interact with. But
Speaker 1: then now with it a part of batteries and really
Speaker 1: seeing the electric vehicle industry take off, and certainly the
Speaker 1: forecast that we see in our electric vehicle outlook, which
Speaker 1: we do on an annual basis shows that there will
Speaker 1: be increased demand. What sort of demand are we really
Speaker 1: forecasting for lithium ion batteries specifically?
Speaker 3: So you're right, as you mentioned, lithium started in consumer electronics,
Speaker 3: and it wasn't until the late twenty tens, at only
Speaker 3: twenty nineteen, where batteries are being used in electric vehicles
Speaker 3: became the main demand segment, and that's only expected to
Speaker 3: continue to grow. So between now and twenty thirty five,
Speaker 3: the lithium I'M battery demand in vehicles is expected to
Speaker 3: really drive demand globally, and that will see a ninefold
Speaker 3: increase from twenty twenty two levels to twenty thirty five.
Speaker 1: Now, battery chemistry seemed to constantly be changing, and honestly,
Speaker 1: I was speaking with my producer today and saying we
Speaker 1: should be doing a show specifically on battery chemistries. But
Speaker 1: for just the next couple of minutes, lithium ion batteries
Speaker 1: certainly make it clear that there is lithium in these batteries.
Speaker 1: Is lithium found in other battery chemistries just not as prevalent,
Speaker 1: or are lithium ion batteries the only ones that have
Speaker 1: lithium in them so.
Speaker 3: Yeah, as you say, lithium in the name of lithium
Speaker 3: ion batteries is the lithium is in all these batteries.
Speaker 3: There are other battery technologies which are emerging at the moment,
Speaker 3: but their uptake and commercial uses is very low at
Speaker 3: the moment. So sodium ion batteries is a key sort
Speaker 3: of disruptive technology that we expect to see come into
Speaker 3: the market over the next couple of years. But at
Speaker 3: the minute, there's not very many people manufacturing these batteries
Speaker 3: at a commercial scale within different battery chemistries, within the
Speaker 3: lithium ion battery family, as it were, Lithium use does
Speaker 3: vary between the chemistries for the amounts of energy that
Speaker 3: you can store, so per killer or tower of energy
Speaker 3: that you can store in the batteries, and we have
Speaker 3: some reports that discuss these different levels of lithium in
Speaker 3: different batteries.
Speaker 1: But it would be safe to say that the forward
Speaker 1: outlook for lithium is increased demand. And then therefore we're
Speaker 1: here to talk about really how where who do we
Speaker 1: get the supply from?
Speaker 3: Yeap, So, as I said, sodium ion batteries are a
Speaker 3: disruptive technology which may come in to the market and
Speaker 3: take some market share. However, in the electric vehicle outlook
Speaker 3: we did earlier this year, we looked at a couple
Speaker 3: of different scenarios of sodium ion penetration into the market.
Speaker 3: At a scenario where there wasn't any a scenario with
Speaker 3: a sort of expected amount of sodium iin in the
Speaker 3: chemistry mix, and a very aggressive sodium ion uptake in
Speaker 3: the market. And even in the most unlikely and disruptive
Speaker 3: and aggressive sodium ion uptake, we still see a five
Speaker 3: fold increase in lithium demand out to twenty thirty five.
Speaker 3: And this is just a consequence of the whole lithium
Speaker 3: ion battery industry growing so much, as I previously mentioned.
Speaker 3: So even of the sort of market share of lithimum
Speaker 3: batteries drops a little bit, because the whole market is
Speaker 3: growing so much, lithium demand is expected to increase.
Speaker 1: So let's go then to where we find this supply.
Speaker 1: Where in the world is it located? And you know,
Speaker 1: can we find it everywhere? Are there a few countries
Speaker 1: that actually have the majority of the supply?
Speaker 2: So lithium deposits are sort of split into two different sections.
Speaker 2: The first is hard rock and predominantly the industry talks
Speaker 2: about spody mean, this is one of the higher grades
Speaker 2: of lithium ore and that is usually found in Australia.
Speaker 2: And there's different areas such as Africa that also have
Speaker 2: SPoD you mean, and hard rock mining there too. Then
Speaker 2: in lithium, there's also another deposit, which is lithium can
Speaker 2: be found in brine, and this is found in groundwater
Speaker 2: all around the world, but predominantly it's found in South America.
Speaker 1: I find it really interesting that you find lithium in brine.
Speaker 1: I mean, you think so much about mining in terms
Speaker 1: of it actually being extracted from somewhere deep within i
Speaker 1: rock as opposed to in some respects kind of quite
Speaker 1: close to the surface. Can we go into a little
Speaker 1: more detail on mining and then following that come to
Speaker 1: the refining process. How difficult is it for us to
Speaker 1: get this out of the ground. For the companies that
Speaker 1: are trying to extract it is a very costly endeavor.
Speaker 2: So, as I mentioned before, the two different types of
Speaker 2: posit require two different types of mining or extraction methods.
Speaker 2: And first you have the extraction from hard rock, and
Speaker 2: that is typical type of mining. You have the large
Speaker 2: rocks in the back of the big lorries and you
Speaker 2: have them running around at like twenty miles twenty miles
Speaker 2: per hour, or it's essentially dug up, crushed, ground and
Speaker 2: roasted at high temperatures before being filtered, purified and turned
Speaker 2: into lithium carbonate. And lithium carbonate is a battery gade product,
Speaker 2: so it goes directly into the manufacturing of these batteries. However,
Speaker 2: lithium carbonate can be further refined into lithium hydroxide and
Speaker 2: this is also another battery grade product. Brine extraction is
Speaker 2: slightly different because here you have vast areas of saline
Speaker 2: ground water that are pumped to the surface by project
Speaker 2: developers and these are left to evaporate in a series
Speaker 2: of ponds, which leaves a concentrated brian remaining, and once
Speaker 2: this remains is then filtered purified into lithium carbonate, which
Speaker 2: may then be turned into lithium hydroxide. In terms of cost,
Speaker 2: our estimates show that spodamine extraction is at least double
Speaker 2: the price of brine extraction, with prices starting at around
Speaker 2: four thousand dollars per ton.
Speaker 1: And spojamine extraction spodamine being the rock that the lithium
Speaker 1: is literally found in yes.
Speaker 2: So it's a type of lithium or and at the
Speaker 2: moment it's the industry's preferred or type because it has
Speaker 2: some of the higher grades of lithium in it.
Speaker 1: In the process to make battery grade lithium, where in
Speaker 1: refining does it actually change hands and change countries from
Speaker 1: where it was extracted to those who are actually refining it.
Speaker 2: So with brine, because of the process and the inherent
Speaker 2: characteristics of the process, it means that a lot of
Speaker 2: the refining happens at the same site at which the
Speaker 2: brian and the evaporation pools are because it's difficult to
Speaker 2: transport a concentrated Brian solution in liquid from one place
Speaker 2: to another. It just doesn't really seem feasible. So a
Speaker 2: lot of the refining happens at the same site. However,
Speaker 2: where it changes is that a lot of a lithium
Speaker 2: carbonate may be shipped to another country to then be
Speaker 2: turned into hydroxide. It wouldn't necessarily happen in the same
Speaker 2: location as.
Speaker 3: The brine extraction.
Speaker 2: On the hard rock, you have a bit more flexibility
Speaker 2: because it's a lot easier to deliver rock or ground
Speaker 2: up rock to another location rather than a concentrated Brian's
Speaker 2: what we see is once it's got past the crushing
Speaker 2: and the grinding and the roasting, it's sent overseas, usually
Speaker 2: to China to do some more refining.
Speaker 1: Now you say usually China, how much of refining actually
Speaker 1: takes place in China?
Speaker 2: So according to our BNFD risked Supply database, around seventy
Speaker 2: two percent of lithium was refined in China in twenty
Speaker 2: twenty two.
Speaker 1: That's a huge part of the market. And in terms
Speaker 1: of looking into the future of that, does that seem
Speaker 1: to hold for the next five plus years.
Speaker 2: Yeah, for sure. We see that China continues to dominate
Speaker 2: up to at least twenty thirty.
Speaker 1: And how much of the lithium that's actually extracted and
Speaker 1: making its way to China is coming from external sources
Speaker 1: versus being well, I guess domestically produced.
Speaker 2: So if we look at the MIND supply again, looking
Speaker 2: at figures for twenty twenty two, Australia was the world's
Speaker 2: top producer of mind lithium with forty two percent of
Speaker 2: the market share, followed by Chile with thirty percent of
Speaker 2: the market share, and then China finally with twenty percent
Speaker 2: of the market share, so it only had a fifth
Speaker 2: of total mind supply in twenty twenty two.
Speaker 1: So does that mean that ultimately China is buying that
Speaker 1: lithium from elsewhere and then selling it on or are
Speaker 1: the companies essentially that are making the batteries buying the
Speaker 1: lithium but then sending it to China for refining who
Speaker 1: owns the lithium? And essentially is China acquiring a large
Speaker 1: amount of the world's existing lithium supply in order to
Speaker 1: refine it and then sell it on.
Speaker 2: So the answers question goes quite a long way back,
Speaker 2: and it starts back in the late noughties where China
Speaker 2: decided to give all these political commitments to green technologies
Speaker 2: because they saw the energy transition as an opportunity and
Speaker 2: the country had ambitions to become a midstream and downstream
Speaker 2: manufacturing base, and it had what it needed to do that,
Speaker 2: but it was missing the key ingredients, which is critical minerals.
Speaker 2: So what it did is it started to invest early
Speaker 2: in some of these upstream projects overseas to ensure that
Speaker 2: they had that constant stream of material and lithium coming
Speaker 2: in to meet their battery manufacturing capacity.
Speaker 1: And when you say invest early, you mean early two thousands,
Speaker 1: so literally twenty years ago or did they buy up
Speaker 1: these assets quite a long time ago?
Speaker 2: Is where they sort of had the vision and then
Speaker 2: lithium only started really becoming big in terms of demand
Speaker 2: and seeing it as an opportunity mid to late teens.
Speaker 1: This is really useful context because I think oftentimes when
Speaker 1: we talk about being in an industry early, we're not
Speaker 1: talking about ten years ago. We're talking about so much
Speaker 1: further back. But the stuff that we're looking at here,
Speaker 1: the change is happening so fast. That's really fascinating that
Speaker 1: we're dealing with these very short periods of time, but
Speaker 1: really do ultimately make all the differences to whether or
Speaker 1: not you're an incumbent player. And you certainly see that
Speaker 1: when it comes to charging networks, which is the topic
Speaker 1: of last week's show. So when it comes to China
Speaker 1: and their role in this space, they saw in advance
Speaker 1: that there was going to be the transition, and I
Speaker 1: guess we're a bit of conjecture here as to what
Speaker 1: was happening, but we certainly do see policies and decisions
Speaker 1: being made in terms of being involved in the lithium
Speaker 1: industry before it was the lithium industry that we know today.
Speaker 1: Can you give me a couple of examples of things
Speaker 1: that China did to make sure that they would be
Speaker 1: one of the established players in this space that now
Speaker 1: has over seventy percent of refining capacity.
Speaker 2: The two big lithium players in China are Gang Feng
Speaker 2: and Tian Schi. If you first take Gunfeng, they have
Speaker 2: a fifty percent ownership in the Mount Marion mine in
Speaker 2: Australia and this started production back in twenty seventeen and
Speaker 2: it's now the second largest lithium mine in the world.
Speaker 2: So having a fifty percent ownership in that obviously gives
Speaker 2: some access to this really really valuable and high in
Speaker 2: demand material. But then if we look at Tian Schi,
Speaker 2: they took a slightly more delayed approach and they bought
Speaker 2: twenty five percent stake in SQM, which is based in
Speaker 2: Chile back in twenty nineteen, and SQM and now of
Speaker 2: the world's second largest lithium producer. So these two examples
Speaker 2: show you how China, moving before the crowd, has given
Speaker 2: them a secure and stable supply of a metal that's
Speaker 2: high in demand and It's important to remember that these
Speaker 2: are only two examples. China has done this over and
Speaker 2: over again around and around the world, and having this
Speaker 2: upstream presence paired with their downstream presence at home means
Speaker 2: that they have ranked number one on all three editions
Speaker 2: of BNF Global Battery Supply Chain Ranking.
Speaker 1: So, if I am in the finance industry, I care
Speaker 1: a lot about environmental, social and governance. If I'm looking
Speaker 1: at these ESG factors and I'm looking at batteries and
Speaker 1: trying to assess my supply chain, what are some of
Speaker 1: the things that really someone would look at in regard
Speaker 1: to lithium and assess whether or not they are fitting
Speaker 1: into that profile of companies that they actually can invest in.
Speaker 2: So I'd say there's three main things to consider when
Speaker 2: looking at lithium extraction, the first being carbon emissions. So
Speaker 2: if you take hard rocked mining, for example, this is
Speaker 2: very energy intensive. It uses lots of large machines, a
Speaker 2: lot of energy to crush, to grind, and to transport
Speaker 2: all around. If we move to brine extraction, it's a
Speaker 2: slightly different problem. Lots of brine extraction happens in very
Speaker 2: arid conditions and the process uses up a lot of
Speaker 2: water and can disrupt fragile ecosystems.
Speaker 1: So the ecosystem and then also it's competing for water
Speaker 1: use potentially with I'm thinking agriculture and other uses for
Speaker 1: drinking water exactly.
Speaker 2: Research has shown that the amount of water used by
Speaker 2: the lithium industry can actually feed and sustain small communities
Speaker 2: of up to tens and thousands of people.
Speaker 1: So it's competitive with other things that may be a
Speaker 1: more important priority in that region. So then the other
Speaker 1: question I actually have is around the hard rock and
Speaker 1: this other form because when you mention energy intensity, immediately,
Speaker 1: at least working here, I immediately think, oh, okay, well,
Speaker 1: then what is there such a thing as green lithium
Speaker 1: And has that been something that has started to come
Speaker 1: on the map? And what I mean by green lithium
Speaker 1: is essentially energy that has come from renewable sources in
Speaker 1: order to facilitate this breaking of rocks.
Speaker 2: Yeah, the short answer is yes. There have been companies
Speaker 2: that have been aware of the scrutiny that the industry
Speaker 2: has been under and are trying to prepare themselves for
Speaker 2: the transition towards net zero and towards a lower carbon world,
Speaker 2: and switching to renewables is a really easy and quick
Speaker 2: way of doing this. However, it doesn't solve the whole problem,
Speaker 2: and the industry can make sure that they are actually
Speaker 2: combating and trying to prevent these problems as much as
Speaker 2: they can.
Speaker 1: So it isn't just investors that are looking at trying
Speaker 1: to make sure the production of batteries and their supply
Speaker 1: chains are the best possible that they can be from
Speaker 1: environmental standards standpoint. There are also policy makers various parts
Speaker 1: of the world that certainly must be looking at this.
Speaker 3: Yeah, for sure, Dana, and at the end of twenty
Speaker 3: twenty two, the EU agreed the battery part of the
Speaker 3: Green New Deal, which forces in fact batteries old in
Speaker 3: the European Union to meet certain requirements. One of the
Speaker 3: key requirements is a carbon footprint target. Now we're still
Speaker 3: waiting for the European Union Commission and other members of
Speaker 3: European policymakers to give exact numbers on what these targets
Speaker 3: will be, but we know that over the next few
Speaker 3: years these targets will be coming in and forcing batteries
Speaker 3: sold within the EU to meet these targets.
Speaker 2: And it might also be worth mentioning on top of
Speaker 2: that that the EU announced the Critical Raw Materials Act
Speaker 2: back in March twenty twenty three, and within that these
Speaker 2: sustainability ambitions also went upstream. So they are looking to
Speaker 2: try and create a benchmark where industry has to meet
Speaker 2: a certain level of sustainability of the materials they produce
Speaker 2: and they can be ranked against each other.
Speaker 1: Give me an idea for the types of companies that
Speaker 1: are actually involved in this space. Is lithium just part
Speaker 1: of a portfolio of many other medals that company might
Speaker 1: be mining, or are these quite specific pure play miners
Speaker 1: that are really looking at this in a more exclusive capacity.
Speaker 2: So what we see is that the majority of the
Speaker 2: top ten lithium producers are exclusively into lithium. So the
Speaker 2: top two that I mentioned already, the first being album
Speaker 2: Mar which is American based, and the second being SQM,
Speaker 2: which is based in Chile. Then you also have the
Speaker 2: Chinese players Gamfeng and Tianchi, as well as Pilbra in Australia.
Speaker 2: So they're scattered all around the world. But what is
Speaker 2: quite unique about lithium is there's lots of smaller players
Speaker 2: that are looking to get involved, and I think this
Speaker 2: is because the market is just finding its feet, so
Speaker 2: it's establishing itself and with this is coming lots of
Speaker 2: smaller players that are contributing positively to the demand and
Speaker 2: supply of lithium.
Speaker 1: So that would mean that these are predominantly fairly new
Speaker 1: companies that may not have existed or at least not
Speaker 1: existed in their current form twenty plus years ago.
Speaker 2: In some cases yes, but in cases of the big
Speaker 2: players such as Albama and SQM, historically there were actually
Speaker 2: chemicals companies and what we've seen them do is we've
Speaker 2: seen them tailor their expertise towards an emerging demand.
Speaker 1: So this has been a pivot for these companies. And
Speaker 1: then I guess that begs the quest and if we're
Speaker 1: seeing increased demand going forward, are there other companies that
Speaker 1: look to be pivoting into that space right now?
Speaker 3: Well?
Speaker 2: I think about that question as metals and minor analysts,
Speaker 2: I will automatically think of the major diversified miners, so
Speaker 2: the glen cores, the bhps, the valleys, the Anglo Americans,
Speaker 2: and surprisingly we haven't actually seen a lot of these
Speaker 2: companies pivot towards lithium apart from one Rio Tinto, who
Speaker 2: back in twenty twenty one purchased the Ricon mine in
Speaker 2: Argentina and recently reinforced their position as the only diversified
Speaker 2: miner to be interested in lithium earlier in August by
Speaker 2: investing into Rwanda. So I think the main reason that
Speaker 2: these other big miners aren't that interested in lithium is
Speaker 2: because firstly, they have other battery metals in their portfolio.
Speaker 2: So a lot of these companies have copper, aluminium, nickel, cobalt, manganese,
Speaker 2: which will all benefit and grow in demand thanks to
Speaker 2: the lithium iron battery boom. I think because lithium's only
Speaker 2: sort of gotten big over the past five six years,
Speaker 2: it means that it's still quite a high risk area.
Speaker 2: And though high risk can equal high reward, some of
Speaker 2: these big miners have too much on their plate and
Speaker 2: have too much on the line to sort of just
Speaker 2: take these dramatic steps and venture into a space where
Speaker 2: it is still a bit of the unknown.
Speaker 1: And is it high risk because of pricing volatility?
Speaker 2: Put simply, I would say yes. If we look at
Speaker 2: the prices over the past two years, we've seen them
Speaker 2: go from around fifteen sixteen thousand dollars per ton in
Speaker 2: twenty twenty one, to over seventy thousand dollars per ton
Speaker 2: in twenty twenty two, and now in twenty twenty three.
Speaker 2: As of a few weeks ago, it was at twenty
Speaker 2: six thousand per ton. So this constant up and down,
Speaker 2: unpredictability and volatility does equate to high risk in the
Speaker 2: mining world.
Speaker 1: I could certainly see how this would be something that
Speaker 1: traders would be watching closely, but then the volatility for
Speaker 1: the companies is maybe less appealing. When it comes to lithium,
Speaker 1: there does seem to be, though this four trajectory, that
Speaker 1: demand is going to increase, and we've brought that up
Speaker 1: a few times on this show. So it seems like, okay,
Speaker 1: let's look at the future for lithium. It seems reasonably sunny.
Speaker 1: But early on in the show, Andy, you reference that
Speaker 1: there might be other technologies that could be nipping on
Speaker 1: its heels, reducing the global demand for lithium and potentially
Speaker 1: preserving water and carbon emissions. What are the other technologies
Speaker 1: that you would say are on the edge from a
Speaker 1: battery standpoint that could give lithium a run for its money.
Speaker 3: So, as I mentioned earlier, sodium mine is one of
Speaker 3: the key technologies which is competing for some market share
Speaker 3: at least in the near future, versus traditional lithium ion batteries.
Speaker 3: There are other battery technologies which may be relevant, for example,
Speaker 3: energy storage projects like flow batteries, something that we've seen
Speaker 3: sort of growing industry for in China. But there's also
Speaker 3: within lithium iine batteries there are a range of different
Speaker 3: chemistries which are constantly competing for.
Speaker 1: Market share, all optimizing certain metals over the others. But
Speaker 1: you brought up sodium ion in particular, So what are
Speaker 1: some of the pros and cons. Let's start with the pros.
Speaker 1: What are the prose of a sodium ion battery and
Speaker 1: why might it have a rosy future?
Speaker 3: So sodiumne batteries the main prose that they don't contain lithium.
Speaker 3: As Elia has already mentioned, lithium has had a really
Speaker 3: volatile time in the commodity markets over the last couple
Speaker 3: of years, and sodium is much more abundant, it's much
Speaker 3: more geographically diverse with respect to where you can find it,
Speaker 3: and it's much cheaper as a consequence. So the main
Speaker 3: benefit is a cost benefit because it doesn't contain lithium.
Speaker 1: Wow. So it's literally the lithium ion part that makes it.
Speaker 1: It's the lithium. So when it comes to the sodium
Speaker 1: ion batteries, now, what are some of the drawbacks and
Speaker 1: why are they not already everywhere that we turn, and
Speaker 1: why are we not having the show lead with sodium
Speaker 1: ion batteries.
Speaker 3: Sodium mine batteries have a lower energy density, So this
Speaker 3: means that you can store less energy in the same
Speaker 3: amount of space or the same amount of mass, and
Speaker 3: this means that if you're putting them in an electric car,
Speaker 3: for example, the number of miles or kilometers that you
Speaker 3: can travel will be fewer.
Speaker 1: So essentially this gets at the heart of whether or
Speaker 1: not range anxiety is or isn't the thing, And we
Speaker 1: certainly go back and forth on this one. But sodium
Speaker 1: ion batteries would mean vehicles that just have a very
Speaker 1: different use case. They're certainly not going to take me
Speaker 1: on a road trip for.
Speaker 3: Sure, as I say, they have a lower range, and
Speaker 3: for some applications or for some regions, this might be okay.
Speaker 3: So for example, the best selling electric vehicle in China
Speaker 3: last year was the Hongyang Mini, which has a price
Speaker 3: of less than ten thousand dollars, but it has a
Speaker 3: very small battery pack range of only one hundred and
Speaker 3: twenty kilometers. But this was the best selling electric vehicle
Speaker 3: in China last year, So it's possible to see that
Speaker 3: a market like this where the best selling vehicle has
Speaker 3: a very short range could sort of offer some market
Speaker 3: share to a lower range but cheaper battery like sodium mine.
Speaker 1: Now, those that are developing these new battery technologies, are
Speaker 1: they also the same manufacturers of the lithium ion batteries,
Speaker 1: essentially looking to diversify or as you mentioned, reduce their
Speaker 1: reliance on this price of lithium that essentially is vollatile.
Speaker 1: Is that something that they're looking do at these completely
Speaker 1: different companies, and essentially we are headed towards a very
Speaker 1: competitive future for vehicle batteries.
Speaker 3: It's a combination of both existing manufacturers and startups. So
Speaker 3: if you look at for example, coatl, the world's largest
Speaker 3: battery manufacturer, they announced in twenty twenty one that they
Speaker 3: were going to be producing a sodi mine battery in
Speaker 3: the future, and they have made some more announcements this
Speaker 3: year confirming these announcements. Also byd and other Chinese manufacturers
Speaker 3: who are existing players are entering this space and making
Speaker 3: announcements that they want to make these batteries. But there
Speaker 3: are startups as well, like Heina, a Chinese company that's
Speaker 3: got gigawa hour production starting at the end of last year,
Speaker 3: and also companies like Autras Feradian in Europe and Natron
Speaker 3: in the United States.
Speaker 1: So let's talk about some other sources of potential disruption
Speaker 1: for the lithium supply chain. Let's talk a little bit
Speaker 1: about geopolitical issues now, with over seventy percent of refining
Speaker 1: in China, that certainly is a vulnerability when you have
Speaker 1: so much in one part of the world, same with
Speaker 1: mining predominantly being in Australia. Are there other issues that
Speaker 1: need to be considered regarding first of all, sources of
Speaker 1: disruption and other producers that could come online or other
Speaker 1: things that maybe I haven't even thought about.
Speaker 2: So, yeah, dependence on one supplier is never a good thing,
Speaker 2: and we've seen issues with that over the past few
Speaker 2: years with COVID and the Russian's invasion of Ukraine where
Speaker 2: we've seen gas or even everyday objects the supply chain
Speaker 2: completely disrupted, and the potential is there for the same
Speaker 2: to happen to lithium iron batteries as well. But diversification
Speaker 2: won't solve everything. If we look at some of the
Speaker 2: key places where we get battery mestals from, there are
Speaker 2: some other sorts of risk there, and these normally surround
Speaker 2: political landscapes. Last week, for example, in Gambon, there was
Speaker 2: a military coup and this led to the temporary suspension
Speaker 2: of a manganese mine in the country. A few months
Speaker 2: ago prior to that, in March, the Chilean government announced
Speaker 2: that they would like a majority stake in all the
Speaker 2: lithium projects that are going to come online from then on.
Speaker 2: Then even further back into twenty nineteen, we saw Indonesia
Speaker 2: ban on pro nickel from export. So there's all these
Speaker 2: changes that happen in the political sense that could disrupt
Speaker 2: and have disrupted supply chains just as much as a
Speaker 2: dependence on one supplier.
Speaker 3: Another thing to consider, as well as the mining and
Speaker 3: refining being dominated by Chinese companies, is moving along the
Speaker 3: value chain to making materials for batteries, so anodes, cathodes, separators,
Speaker 3: and electrolytes. Currently over seventy five percent of manufacturing capacity
Speaker 3: for all of these components is based in China, as
Speaker 3: per company announcements, and if we look at where this
Speaker 3: is going over the next few years, this is an
Speaker 3: industry which is getting more and more dominated by Chinese companies,
Speaker 3: and that manufacturing capacity for battery components is becoming more
Speaker 3: Chinese out of twenty five.
Speaker 1: The Inflation Reduction Act in the US certainly has the
Speaker 1: aims of bringing a lot of manufacturing of various industries
Speaker 1: back on shore and to nearshore and onshore, different parts
Speaker 1: of clean energy, certainly things that we've talked about in
Speaker 1: other shows. How does this impact batteries and lithium? Has
Speaker 1: there been a move for the US to essentially take
Speaker 1: part of either the refining process or battery manufacturing process
Speaker 1: on shore.
Speaker 3: With respect to battery manufacturing, there have been billions of
Speaker 3: dollars of announcements from automakers as well as battery manufacturing
Speaker 3: companies making joint ventures across the United States in the
Speaker 3: last year or so since the announcement of the Inflation
Speaker 3: Reduction Act. However, these announcements and this investment is currently
Speaker 3: relatively limited to sell manufacturing and with respect to manufacturing components,
Speaker 3: as I previously said, like cathodes, anode separators and electrolyte
Speaker 3: These announcements haven't yet been made to onshore the whole
Speaker 3: value chain of battery manufacturing.
Speaker 1: How about refining. Is that something that companies are looking
Speaker 1: to put in different parts of the world or is
Speaker 1: this established incumbent player likely to continue to hold battery
Speaker 1: refining in their country for the foreseeable future.
Speaker 2: So to take it back a bit, the IRA basically
Speaker 2: introduces this EV tax credit, which is worth up to
Speaker 2: seven five hundred dollars, and to be eligible for this
Speaker 2: tax credit, automakers have to meet a certain level of
Speaker 2: critical mineral requirements and battery component requirements. For the battery
Speaker 2: component requirements, it means that a certain value of these
Speaker 2: components have to be assembled or manufactured in North America.
Speaker 2: And for critical minerals, it's a certain value of the
Speaker 2: crystal minerals in the battery have to be extracted or
Speaker 2: processed in the US or in a country that's got
Speaker 2: a free trade agreement with the US, or in Japan.
Speaker 1: Are these high percentages of the overall.
Speaker 2: They came into play at the start of twenty twenty
Speaker 2: three and up until twenty thirty two. The value is
Speaker 2: slowly increasing so for critical minerals, the value starts at
Speaker 2: forty percent of those in the battery have to come
Speaker 2: from these predetermined locations. In terms of the investments that
Speaker 2: we've seen since the IRA, unfortunately in the raw materials
Speaker 2: and mining side of things, it hasn't met or reached
Speaker 2: nowhere near the amounts seen in the battery manufacturing. So
Speaker 2: to put some numbers to it, battery manufacturing has seen
Speaker 2: forty two billion pounds of investments since the IRA was announced,
Speaker 2: but raw materials investments in mining and refining has only
Speaker 2: seen one point three billion, and this is a massive difference.
Speaker 1: So actually, just to summarize, I would love for you
Speaker 1: guys to just really kind of put it all in order.
Speaker 1: In my mind, there's this kind of hierarchy, if you will,
Speaker 1: of different mining sources for lithium, and then places where
Speaker 1: well one place in particular where much of the refining
Speaker 1: is taking place. And then invariably we're also seeing manufacturing
Speaker 1: of batteries that being much more distributed. We mentioned the
Speaker 1: Inflation Reduction Act and how that's actually actively changing the
Speaker 1: way the US look is approaching battery manufacturing. This then
Speaker 1: leads me to wanting you guys to clarify who army.
Speaker 1: Does the future look similar to today or the research
Speaker 1: that you're looking at, whether it comes from these sodium
Speaker 1: ion batteries or for different countries trying to increase their
Speaker 1: mining capacity. Does this look like a space that's going
Speaker 1: to have a ton of disruption in the near term?
Speaker 3: In sure, I think yes. With respect to the technologies,
Speaker 3: there's constant innovation. Sodium ion batteries have been around for
Speaker 3: as long as lithiumin batteries. Their original scientific discoveries were
Speaker 3: of a similar time, but the lower energy density left
Speaker 3: them part for a long time, and now they're making
Speaker 3: a big comeback. And if we go back just a
Speaker 3: couple of years, a similar thing happened with lithium ion phosphate,
Speaker 3: so still a lithiumin battery, but it was a chemistry
Speaker 3: that had gone out of favor for a bit because
Speaker 3: of its lower energy density. But high lithium prices and
Speaker 3: innovations and developments with this technology meant that it became
Speaker 3: one of the more popular chemistries that we talk about today.
Speaker 3: And I think that this will only continue to happen
Speaker 3: into the future with solid state batteries and maybe even
Speaker 3: other other technologies that are still very much on lab
Speaker 3: benches rather than in factories today.
Speaker 2: It's funny that Anthy said yes, because I was going
Speaker 2: to say no. So over the past few years we've
Speaker 2: seen a really really big effort for countries trying to
Speaker 2: diversify supply chains, and leaders have reinstated their ambitions to
Speaker 2: try and diversify supply chains in a sustainable and responsible way,
Speaker 2: which is great. But if we look at them of
Speaker 2: this in the near term, so say the next five, six, seven,
Speaker 2: eight years, I don't envision a massive change in terms
Speaker 2: of the lithium producers, the lithium refiners, and the processes
Speaker 2: and supply chains for other battery metals as well. Efforts
Speaker 2: will be going in the right direction, but I don't
Speaker 2: think they can knock China off the top spot anytime soon.
Speaker 3: Does that have to do with the long times it
Speaker 3: takes to build a mine and to build refining capacity
Speaker 3: with respect to permitting and other other sort of issues.
Speaker 2: For sure. So if you look at average mining timelines
Speaker 2: from expiration to production can take up to sixteen years.
Speaker 2: So more and more we're seeing companies investing into looking
Speaker 2: in lithium deposits and other deposits of other battery metals,
Speaker 2: but they're not going to see the light of day
Speaker 2: until the twenty thirties, and those have already been discovered
Speaker 2: and they're halfway through these timelines. These processes include a
Speaker 2: lot of red tape, and as we're seeing more of
Speaker 2: a focus on the environment, some of the environmental processes
Speaker 2: and permitting which is getting a stricter, which is adding
Speaker 2: further today's.
Speaker 1: And the rights to actually buy this lithium to actually
Speaker 1: use it in these batteries to be produced in the future.
Speaker 1: Have those contracts largely been secured or is that something
Speaker 1: that the lithium industry comes to the table out each year.
Speaker 2: So a lot of companies purchased lithium in advance, not
Speaker 2: necessarily years and years in advance, but we see off
Speaker 2: take agreements ranging from about three to five years in general.
Speaker 1: Okay, we have come to the water ignore section of
Speaker 1: the podcast, which occasionally I throw this in the end
Speaker 1: of a show, where I want to ask whether or
Speaker 1: not you the experts who are looking at this all
Speaker 1: day are keeping a close eye on something or potentially
Speaker 1: kind of tabling it to the background while you focus
Speaker 1: on other things, because you don't think it's quite as
Speaker 1: important now when it comes to these sodium ion batteries
Speaker 1: and a vehicle that essentially has less range but is
Speaker 1: also less expensive. Having just come back from the US
Speaker 1: and driving on some of the freeways there, I saw
Speaker 1: a lot of very large SUVs and in water ignore
Speaker 1: sodium ion battery powered vehicles in North America.
Speaker 3: I like to watch as many things as I can,
Speaker 3: but I don't expect sodium ion to be in vehicles
Speaker 3: in North America anytime soon due to, as you already mentioned,
Speaker 3: the lower range. So this is not in the forefront
Speaker 3: of my thoughts at the moment.
Speaker 1: Where is the predominant use case do you think with.
Speaker 3: Respect to vehicles? I think smaller vehicles with lower ranges,
Speaker 3: so small cars for sure, but then also two and
Speaker 3: three wheeled vehicles, so electric electric motorcycles or tik tooks
Speaker 3: which you may find in Asia, for example, which have
Speaker 3: historically used lead acid batteries. And with respect to lead
Speaker 3: acid batteries, sodiumine is actually an energy density improvement, so
Speaker 3: it may even offer arrange improvement for these vehicles.
Speaker 1: Okay, so Ellie, one for you, and I think you've
Speaker 1: already answered this question, but I'm going to make you
Speaker 1: give me an answer that we're going to have to
Speaker 1: stick to. Are you watching or ignoring the idea of
Speaker 1: refining capacity coming specifically to Europe or North America for
Speaker 1: lithium dana.
Speaker 2: That is a really, really hard question, because it's like
Speaker 2: you're trying to make me choose between my head and
Speaker 2: my heart. What I would say is, although I don't
Speaker 2: see anyone replicating exactly China's success, what we are seeing
Speaker 2: is policies coming into place, like the IRA and the CRM,
Speaker 2: like the Europeans Critical Raw Materials Act, that are pushing
Speaker 2: companies in industry in the direction of these alternative locations,
Speaker 2: and with the targets they have in place, and with
Speaker 2: companies that are based in these locations that have a
Speaker 2: demand for local materials, I think we will see increasingly
Speaker 2: more and more refining happening in other parts of the world.
Speaker 1: Okay, So last one in the watcher ignore section, the
Speaker 1: Carbon Border Adjustment Mechanism SEABAM. Are you watching or ignoring
Speaker 1: whether or not there is potential for SEABAM to expand
Speaker 1: to include battery metals.
Speaker 2: So on SEABAM, I think we should shelf it for now,
Speaker 2: but I think it's something we should definitely revisit in
Speaker 2: the future as demand and supply of battery metals increases massively,
Speaker 2: and also until we see the success of the currency.
Speaker 1: Bam okay, Ellie, Andy, thank you very much for joining.
Speaker 3: Thank thank very much, Dana, Thanks Dana.
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