Lithium's Future: Meeting the Demand for EVs and Battery Storage

Current Supply and Demand Dynamics

Albemarle and Tesla are strategically aligning costs and increasing production to meet high lithium demand, despite price pressures and rising material costs. Factors such as declining battery costs, improved performance, and significant investments in the supply chain support this demand, highlighting a robust market environment for lithium.

"During the quarter, we delivered more than $90 million in productivity and restructuring cost savings consistent with our efforts to align our costs with the current market environment." --- (ALB, earning call, 2024/Q1)

"We continue to increase the production of our energy storage products to meet high levels of demand, including the construction of a new Megafactory in Shanghai and the ongoing ramp at our Megafactory in Lathrop, California." --- (TSLA, sec filing, 2024/Q1)

"Amidst these dynamics, and despite recent downward lithium price pressure, we believe our business fundamentals are sound and that we are strategically well-positioned as we remain focused on increasing sales volumes, optimizing and improving the value of our portfolio primarily through pricing and product development, managing costs and delivering value to our customers and shareholders." --- (ALB, sec filing, 2024/Q1)

"At the same time, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and other potential variables such as rising material prices and increases in supply chain and labor expenses resulting from changes in global trade conditions and labor availability." --- (TSLA, sec filing, 2024/Q1)

"This demand for lithium is supported by a favorable backdrop of steadily declining lithium-ion battery costs, increasing battery performance, continuing significant investments in the battery and EV supply chain by cathode and battery producers and automotive OEMs and favorable global public policy toward e-mobility/renewable energy usage." --- (ALB, sec filing, 2024/Q1)

Role of Major Lithium Producers

Major lithium producers like Albemarle and Rio Tinto are ramping up U.S.-based production and leveraging innovative products to meet the surging demand for EVs and battery storage. Strategic acquisitions and localized production efforts are crucial in addressing supply constraints and supporting the clean energy revolution.

""This facility will help increase the production of U.S.-based lithium resources to fuel the clean energy revolution while bringing us closer to our customers as the supply chain is built out in North America," said Albemarle CEO Kent Masters." --- (ALB, press release, 2024/04/22)

"The company states it has demonstrated significant progress in monetizing a commercial premium that reflects the value in use generated for its customers by its proprietary Quintuple Zero Green Lithium product, which achieved a fixed formula of 9% of lithium hydroxide quoted at LME represents a meaningful increase over previous prices achieved." --- (ALB, press release, 2024/07/15)

""Rincon strengthens our battery materials business and positions Rio Tinto to meet the double-digit growth in demand for lithium over the next decade, at a time when supply is constrained," said Jakob Stausholm, CEO of Rio Tinto." --- (Rio Tinto, press release, 2024/04/26)

"The Project is already surrounded by two leading lithium producers, Livent and POSCO, which acquired the property from Galaxy Resources (now Allkem) for US$280 million." --- (ALB, press release, 2024/04/26)

""Helping unlock lithium in the U.S. will help us support localized production of battery cells going forward," said Drake." --- (ALB, press release, 2024/04/22)

Technological Advancements in Battery Storage

Tesla is advancing battery storage technology through proprietary cell innovations, ambitious production targets, and a recycling ecosystem. Albemarle's strategy to produce high-quality battery materials further supports the clean energy transition.

"And we are also working to build a battery material recycling ecosystem, both internally and with others to ensure that we are moving towards a truly circular economy for energy storage." --- (TSLA, event transcript, 2024/06/13)

"The overall increase was primarily driven by additional costs year over year related to AI, advancement of our proprietary battery cell technologies and other programs." --- (TSLA, sec filing, 2024/Q1)

"Albemarle believes the addition of Liontown and its team would advance its strategy to produce a sustainable, high-quality supply of battery grade materials to support the clean energy transition." --- (Albemarle, press release, 2024/04/22)

"It's about 4 years since you did Battery Day and grew out those very amassious targets of getting to a terawatt hour of batteries." --- (TSLA, event transcript, 2024/06/13)

"Like, you get it, you know. And so so like important thing is you get it. I mean, it's so the yes, where things are going, I think, is just going to be absolutely mind blowing. We're obviously making great progress in solving the sustainable energy problem with electric vehicles, with stationary storage, with solar." --- (TSLA, event transcript, 2024/06/13)

Impact of Government Policies and Regulations

Government policies and regulations significantly impact the EV market. GM faces challenges from heightened emission standards, evolving trade policies, and regulatory uncertainties, including tariffs on batteries and critical materials. Legislative changes and support for acts like the IRA are crucial for scaling up EV production, influencing lithium demand.

"We face continuing market, operating and regulatory challenges in several countries across the globe due to, among other factors, competitive pressures, our product portfolio offerings, heightened emission standards, labor disruptions, foreign exchange volatility, evolving trade policy and political uncertainty." --- (GM, sec filing, 2024/Q1)

"And with that, if we don't get that legislative change or authorization from a government perspective, we're limited in the number of Origins we could put out. So as we looked at this, we thought it was better to get rid of that risk." --- (GM, earning call, 2024/Q2)

"At the end we have said that we support IRA as a bridge to the compliance mandates that public policy has established because we need that to be able to scale up as rapidly as policy has indicated." --- (GM, conference, 2024/06/11)

"There's quite a bit of regulatory uncertainty surrounding EVs. Recently, the Biden administration rolled out a series of tariffs on batteries as well as some critical materials imported from China. At the same time, the IRA benefits in terms of tax credit for EV" --- (GM, conference, 2024/06/11)

"Other shareholder proposals focus on our EV supply chain policies and practices.GM follows sustainable and ethical practices throughout our entire global supply chain as we advance our strategy to make all electric zero emission vehicles more accessible and affordable for everyone." --- (GM, event transcript, 2024/06/04)

Environmental Impact of Lithium Mining

Albemarle is committed to resuming lithium mining at Kings Mountain in an environmentally and socially responsible manner, focusing on repurposing byproducts and enhancing local economic benefits. Additionally, they are conducting assessments to manage potential environmental impacts, ensuring the health and safety of the surrounding community.

"This agreement is part of Albemarle's plan to resume lithium mining operations at the Kings Mountain Mine in an environmentally and socially responsible manner, including opportunities to repurpose byproduct material and enhance the economic benefits for the surrounding community." --- (ALB, press release, 2024/05/08)

"As a key element of IRMA's Standard for Responsible Mining, the assessment seeks to better understand and manage potential impacts from the proposed mine with consideration to the surrounding environment, local economy, and the community's health and safety." --- (ALB, press release, 2024/06/11)

Alternative Materials and Technologies

Solid Power is advancing solid-state battery technology, focusing on sulfide-based electrolytes. This approach aims to enhance driving range, battery life, safety, and cost-efficiency compared to traditional lithium-ion batteries, despite the increased complexity and potential for failure with more materials and connections.

"We are a battery technology company. We do 2 things. We are focused on developing the next generation of EV battery cells, And we're also a provider of materials that go into those cells, specifically sulfide based electrolytes." --- (SLDP, conference, 2024/05/23)

"And so, the combination of more material, more connections, more energy means that you have significantly more opportunities for failure." --- (SLDP, conference, 2024/05/23)

"And I'll start with the technology approach. Solid Power's focus is purely on solid state technology, and we call it pure or all solid state technology." --- (SLDP, conference, 2024/05/23)

"Solid Power's core technology is its electrolyte material, which Solid Power believes can enable extended driving range, longer battery life, improved safety, and lower cost compared to traditional lithium-ion." --- (SLDP, press release, 2024/07/16)

"for the fast-growing EV and other markets. Solid Power's core technology is its electrolyte material, which Solid Power believes can enable extended driving range, longer battery life, improved safety, and lower cost compared to traditional lithium-ion." --- (SLDP, press release, 2024/05/07)

Future Market Projections for Lithium

Albemarle projects lithium market prices to rise significantly, with net sales potentially reaching $7.6 billion and adjusted EBITDA up to $2.6 billion by late 2023. Lithium South anticipates robust growth and expansion, highlighting a promising future for the lithium market.

"Total Corporate FY 2024E Including Energy Storage Scenarios Observed market price case(a) YE 2023 Q4 2023 average H2 2023 average Average lithium market price ($/kg LCE)(a) ~$15 ~$20 ~$25 Net sales $5.5 - $6.2 billion $6.1 - $6.8 billion $6.9 - $7.6 billion Adjusted EBITDA(b)(c) $0.9 - $1.2 billion $1.6 - $1.8 billion $2.3 - $2.6 billion (a) Price represents blend of relevant Asia and China market indices for the periods referenced." --- (ALB, press release, 2024/05/01)

"Hobkirk, Founder, President and CEO of Lithium South. "The robust economics and room for expansion indicate a promising future for Lithium South." Since the PEA filing, Lithium South has also provided an update detailing progress on its first pumping well to be located on the largest claim block in the 5-claim salar located HMN Li package—the 2,089-hectare Alba Sabrina block." --- (Lithium South, press release, 2024/07/15)