Lithium producers are growing anxious that delays in mine permitting, staffing shortages, and inflation may hinder their supply of enough battery metal from meeting the world’s aggressive electric vehicle (EV) demand. Lithium is a critical ingredient in EV batteries, and as demand has boomed, so have prices for the white metal.
Lithium companies are working hard to boost output and bring new projects online despite the challenges. But bringing a lithium project up and running can take 3-5 years or more. And that’s on top of the time it takes to drill and blast, build a dam, run water lines, install power, and other infrastructure.
Executives say that the complexities of getting new lithium projects up and running have caused some companies to delay plans or scrap them altogether. A shortage of technical expertise has also made recruiting employees needed to operate and maintain mining equipment difficult. Rising costs for essential materials such as graphite, a key component in EV batteries, have increased prices.
Adding to the challenge is that only a few major mining companies are active in lithium. Larger companies are afraid to enter the market for fear of repeating what happened in copper a few years ago when supply surged, and prices crashed.
As a result, most lithium production comes from small miners and a few more prominent companies, such as Rio Tinto and Albemarle, that acquired smaller firms. This has sparked competition for the precious metal. The result is that some of the largest producers report losses as they struggle to keep up with rising demand.
One example is the Canadian firm Lake Resources, which announced this week that it would delay the start of production at its Kachi lithium project in Argentina by three years, citing energy supply and other concerns. Other projects must catch up on environmental hurdles, political risks, and financing problems.
Lithium producers may also need help securing the other vital ingredients required to make an EV, including cobalt and nickel. These are concentrated in unstable regions and can be subject to politically motivated supply disruptions. This has slowed the building of a battery “Gigafactory” in the Democratic Republic of Congo by LG Chem, which will supply GM’s upcoming EVs, and AESC Envision, which will produce cells for Tesla’s cars.
While China has become a model for other countries to follow in the race to dominate EV sales, it needs to be clarified whether other nations can replicate its success. Many need to gain traditional auto industries or the Chinese government’s experience in navigating the development of massive industrial policies. They have different access to cheap capital, allowing China to build a giant battery factory in less than a year. They also need a domestic lithium industry to supply a battery plant and absorb the upfront costs. That could make it harder for them to compete with the likes of Tesla and GM, even with subsidies.