As consumption recovers from the recession, demand for one of the lightest metals—lithium—is on the up again
By Simon Walker, European Editor
The term ‘light metals’ is often used to encompass lithium, beryllium, magnesium, sodium, titanium and aluminum, all of which have widespread applications in day-to-day life. Here, however, the focus is on lithium; the magnesium market is in crisis, titanium and aluminum occupy a much larger market segment on their own, while sodium is principally of importance for its chemical properties rather than its metallurgy.
In a way comparable to rare earths (E&MJ, December 2010, p.46–53), in that the world’s production capacity is highly concentrated in just a few places, lithium has become increasingly important over the past 20 years. Its use in rechargeable batteries especially has resulted in rising demand.
Paradoxically, although production is so concentrated, lithium is relatively common within nature, occurring widely in trace amounts, and in higher concentrations in igneous rocks such as pegmatites. Natural brines are the other principal source, with major resources in South America having been augmented by exploration in other, mainly arid areas of the world.
Lithium: Resources and Production
Although it was isolated in 1821, it was not until the 1920s that a process was developed for commercial lithium production, a move credited to the Germany company, Metallgesellschaft. Production was based entirely on hard-rock resources, principally spodumene and lepidolite deposits occurring in pegmatites, a situation that continued right through to the 1990s. The subsequent switch to recovery from brines not only shifted the focus of production away from the United States and other traditional producers to new players in South America, but also resulted in a major cut in production costs. This in turn impacted some pegmatite-based operations, which could no longer compete.
According to statistics compiled by the British Geological Survey, world lithium production (lithium content) rose from an estimated 11,300 metric tons (mt) in 1999 to 20,600 mt in 2008, the most recent year for which the organization has published data. During that time, the principal increases in output have come from Argentina and Chile, both of which host brine production. Hard-rock production of lithium minerals also increased significantly in Australia, where the uncertainty over the Greenbushes operation in Western Australia following the collapse of its former owner, Sons of Gwalia, was resolved when it was sold to Talison Minerals in 2007.
Aside from these, lithium minerals are produced in Portugal, Spain, Brazil, Canada, Russia and China, with minor output in the United States coming from brine sources in Nevada. Zimbabwe is a past producer, but the situation there is unclear with no data available for recent years. While economic sanctions against the country’s government have shut off access to its traditional markets, there is, of course, the possibility that output has continued, with clandestine shipments elsewhere.
In its most recent survey of the world lithium industry, Roskill Information Services cited a slightly higher figure for production in 2008, at 22,800 mt, while agreeing with the BGS over the relative growth in output over the preceding 10 years. The world’s four leading producers are the Chilean company Sociedad Quimica y Minera (SQM), and U.S.-based FMC Lithium and Chemetall-Foote (now part of Rockwood Holdings), all of which source their output from brines, and Talison Lithium in Australia, which is by far the largest producer of pegmatite-hosted lithium minerals.
Although Chinese domestic production has been growing quickly in recent years, its output in 2008 was only around 1,800 mt. Sustained exploration has resulted in the discovery of significant new brine resources in western China and Tibet, although unfavorable brine chemistry is reported to have slowed their development.
In 2008, U.S.-based consultant R. Keith Evans produced an open-access report on lithium reserves in which he showed that far from the potential shortage that had been predicted in a U.S. government-sponsored study in the 1970s, world lithium resources are more than adequate to supply demand well into the future. Whereas the 1976 report estimated Western World reserves at around 10.6 million mt of lithium (the focus then being on its strategic uses in nuclear applications), Evans now puts the global figure at 28.4 million mt of lithium, equivalent to more than 150 million mt of its most commonly used compound, lithium carbonate. Of this, he noted, nearly 14 million mt of lithium is held in active or proposed operations. To put this into context, he went on, the current world demand for lithium is about 16,000 mt/y, or around 84,000 mt/y of lithium carbonate.
Lithium in Industry
While the public at large will probably be most familiar with the lithium-ion battery that powers their laptops, mobile phones and rechargeable power tools, in point of fact this is a relatively new application for lithium. As an end-use, battery production grew from just 6% of total demand in 2000 to 20% in 2008, Roskill estimates, although there is clearly continuing growth potential in this market segment, especially if electric and hybrid cars gain greater consumer acceptance.
With commercially viable production only recently achieved, the first main use for lithium—during the 1940s—was in lubricants, especially greases. End-uses subsequently expanded to include military nuclear applications (which led to the development of pegmatite-based production in the U.S.), and in the production of glass, ceramics and aluminum. In 2009, Roskill’s research indicated 31% of total demand came from the glass and ceramics industry, with batteries taking a further 23%. Other significant end-uses were greases (9%), aluminum production and air conditioning (6% each), continuous casting and the rubber/thermoplastics sector (4% each) and pharmaceuticals (2%), with lithium-based compounds being well-established as a treatment for bipolar disorder. Organic chemistry uses compounds such as butyllithium and hexyllithium in the production of agricultural chemicals, fragrances and food flavors, while lithium metal and salts such as lithium aluminum hydride are reducing agents.
The global economic downturn had a marked impact on lithium demand, however, with demand for lithium carbonate down 20%–30% between 2008 and 2009 and trade in lithium compounds no less than 43% down year-on-year. In consequence, prices slumped, with lithium carbonate trading at around $5,000/mt at the beginning of 2010.
What is more, the situation has not improved much since; although demand has begun to increase again, over-capacity among the main suppliers has meant further falls in the price. Speaking at the Third Industrial Minerals’ Lithium Supply and Markets conference in Toronto in January, the president of the lithium consultancy, TRU Group, Edward Anderson, said: “Lithium carbonate prices fell precipitately to $4,500/mt in 2010 and will remain depressed. Long term there is no market-driven upward-price pressure, so prices will remain stable and likely below $5,000/mt.”
The Battery Boom
Without question, the driving force behind both new project developments and expansions at existing producers is the perceived growth in demand for lithium from the battery sector. While up to now most of the demand has come from relatively small-scale battery applications, the predicted surge in requirements will come with the introduction of a much wider range of electric and hybrid cars, each of which will need sufficient power-storage capacity to make the concept an attractive alternative to conventional power sources.
Lithium has the highest electric output per unit weight of any battery material yet developed, with lithium-ion and lithium-polymer rechargeable batteries leading the way in automotive applications. Major advantages over the nickel-metal hydride batteries that powered the first generations of electric and hybrid cars also include the lack of a ‘memory effect’ and much lower self-discharging potential when not in use.
Ed Anderson predicted that while primary (non-rechargeable) and secondary (rechargeable) batteries accounted for about 18% of total lithium consumption in 2010, growth in both the consumer electronics and, potentially, the electric vehicle battery markets particularly will push this proportion to almost 45% by 2020.
However, he added, the market for transport batteries is complicated by the various alternatives available: hybrids, plug-in hybrids and fully electrical vehicles. The amount of lithium needed for their batteries increases with greater reliance on full electric power. Robert Baylis from Roskill cited lithium carbonate equivalent requirements of 2 kg, 15 kg and 22 kg per vehicle, respectively, in a 2010 conference. That, he said, has implications for between 60,000 and 120,000 mt/y of lithium carbonate equivalent by 2020, depending on the level of market penetration for electric and hybrid vehicles.
While many of the world’s vehicle manufacturers have their eyes on this segment, actual consumer take-up is by no means assured, with range-before-recharging and comparative ownership costs being the critical concerns. Nissan’s Leaf, which was introduced in the U.S. in late 2010 and is slated for global marketing by 2012, costs some $33,000 and up; its lithium-ion battery currently accounts for a reported $18,000 of this.
Virtually all of the world’s lithium battery manufacturing capacity lies in three countries at the moment: China, Japan and South Korea. Recent U.S. government aid has targeted investment in domestic production and recycling capacity, with the Department of Energy having provided $2.4 billion in grants for development of the electric car market. Of this, some $940 million went to companies involved in lithium materials supply, battery manufacture and recycling.
However, lithium’s market as a major input into vehicle batteries could be transitory. Earlier this year, Bloomberg carried a report that Toyota is working on the development of rechargeable magnesium-sulphur batteries that would offer twice the capacity of existing lithium-ion units, although the technology is a decade away from commercialization.
Producing Lithium from Brines
The brine resources in continental salt pans, or salars, contain a mixture of chemicals, from which the lithium content has to be recovered. Although the basic principal is simple—allow the sun and wind to evaporate the brine in ponds so that salts crystallize out of solution sequentially—the processing route used in practice depends to a large extent on the precise chemical composition of the brine.
In another presentation during the Toronto lithium conference, TRU Group’s Dr. Ihor Kunasz explained the implications of varying chemistry on the recovery process. Among the critical parameters for consideration are the initial concentrations, and the relative ratios between lithium, magnesium, potassium and sulphates, he said. Each deposit is unique in this respect, with the lithium-to-magnesium ratio especially important. A high magnesium content implies that it will be more expensive to separate the two by fractional crystallization or selective precipitation.
In point of fact, lithium usually only makes up a very small proportion of the brine chemistry. According to Kunasz, SQM’s Salar de Atacama brine contains 0.15% lithium; Silver Peak 0.02% and Uyuni in Bolivia (often cited as the world’s largest lithium resource) 0.045%. The world’s largest producer, SQM, recovers much more potash (for fertilizer) from its operation than lithium, which is effectively a by-product that accounted for just 11% of the company’s revenues in 2009. That 11% was, nonetheless, highly profitable.
In a typical operation, brine pumped from underground is held in a series of ponds, with water evaporation over time resulting in higher salt concentrations and, eventually, salt crystallization. By transferring the increasingly concentrated brine from one pond to the next, different salts can be recovered sequentially, depending on the brine make-up. Such a sequence could run through halite, sylvite, carnallite, borates, and magnesium and calcium carbonates before the final recovery of lithium. Other products could include sodium sulphate, potash and borates, all of which are eminently marketable.
Final products include lithium carbonate, chloride and hydroxide, each of which serves different end-user markets.
The separation of magnesium from lithium salts can be costly, as Rick Mills, host of aheadoftheherd.com, pointed out in a recent series of articles. There, he noted the magnesium-to-lithium ratio must be below 9:1 or 10:1 for a project to be economic, largely because of the need to use slaked lime to precipitate magnesium salts from solution. “If the ratio is 1:1 in the original brine, then the added cost (reflecting the cost of slaked lime) is $180/mt of lithium carbonate produced. If the magnesium-to-lithium ratio is 4:1, then the cost of removing magnesium is $720/mt of lithium carbonate,” Mills said.
Projects and Pitfalls
Shortages in brine-processing capacity a few years ago sparked renewed interest in lithium resources, only for the recession to hit the industry hard. That has not, however, deterred a raft of predominantly junior companies from investing in evaluation projects, with some of the major end-users, such as Toyota, also taking holdings in companies involved in exploration as a means of tying-in future supplies.
And it has not just been continental brine and pegmatite resources that have come under scrutiny: Keith Evans’ report lists oilfield and geothermal brines as also being potential sources of lithium, as well as hectorite clays that are known to occur in parts of the western U.S. and elsewhere.
The major players have also been spending money on their existing projects. Chemetall’s parent company, Rockwood, is spending $56.8 million on expanding its lithium capabilities in the U.S., with the government providing half of the funding. The project involves doubling capacity at Chemetall Foote’s Silver Peak operation in Nevada, plus the installation of a geothermal power plant that will supply virtually all of the operation’s energy needs.
Among the juniors, Australian explorer Orocobre is currently working on its Salar de Olaroz lithium-potash project in Argentina, based on inferred resources of 1.5 million mt of lithium carbonate and 4.4 million mt of potash. The company is planning the production of 15,000 mt/y of lithium carbonate and 36,000 mt/y of potash from 2012, with capex estimated in the range $80–$100 million. In January 2010, Orocobre signed a deal with Toyota’s procurement company under which Toyota will provide $4.5 million in funding as well as arranging Japanese government financing for project construction. The Jujuy provincial government gave approval for the project’s EIS earlier this year.
Ownership of Rincon Lithium, which is currently developing the Salar de Rincon brine operation in Salta province, Argentina, changed hands over the past couple of years. In late 2008, Admiralty Resources sold its interest in the project, which it had taken to pilot stage, to the Sentient investment group. Rincon has proven and probable reserves totaling 1.4 million mt of lithium and 51 million mt of potash. Commercial production of battery-grade lithium carbonate is scheduled to begin this year, the company said.
However, all of the known salar deposits are dwarfed by Uyuni in southern Bolivia. USGS estimates suggest it hosts a resource of more than 5 million mt of lithium, although recent announcements from the Bolivian government have more than doubled that amount. The Bolivian state mining company, Comibol, has been given responsibility for the development of Uyuni’s resources, although an initial target of 1,000 mt of lithium this year has been halved.
In August 2009, the South Korean and Bolivian governments were reported to have signed an agreement over development of the salar, although specifics were notably absent from the deal. This was followed last December by an agreement between the Bolivians and the Japanese state company, Japan Oil, Gas and Metals National Corp. (JOGMEC), which will provide equipment and personnel for a pilot plant.
However, there are some major challenges to overcome at Uyuni, not least of which is the fact that the salar—unlike others in Argentina and Chile—floods each year. The brine also has low lithium and very high magnesium contents, so lithium extraction is likely to be expensive.
One of the world’s more unusual sources of lithium is now under evaluation by Western Lithium, which was spun out of Western Uranium Corp. in mid-2008. The company claims a resource of 11 million mt of lithium carbonate equivalent (based on exploration by Chevron Resources in the 1970s and 1980s) contained in hectorite lenses in the Kings Valley of northwestern Nevada. Hectorite is a magnesium-lithium smectite clay, with Kings Valley being the largest of several such occurrences in the western U.S.
Western Lithium began a prefeasibility study on the project in January, having already successfully produced lithium carbonate from its pilot plant there. Capex costs of $427 million have been estimated for the first stage of the project, with start-up provisionally targeted for 2014 at a rate of 27,700 mt of lithium carbonate equivalent and 115,000 mt/y of potassium sulphate.
But Will They Fly...?
In 2006, William Tahil of Meridian International Research issued a stark warning that soaring demand from the automotive battery sector would lead to major shortfalls in lithium supply. World resources, he said in a paper titled The Trouble with Lithium, are simply inadequate for the lithium production needed to sustain electric vehicle manufacture at the volumes required, and he went on to suggest that alternatives such as zinc-air and sodium-nickel chloride batteries offered a potential solution.
With supply then also somewhat constrained by a shortfall in brine capacity, little wonder then that there were plenty of mainly junior companies, eager to get in to what they perceived as being a market with good prospects. However, Keith Evans’ report, published two years later, was unequivocal in its rebuttal of this perspective. “Concerns regarding lithium availability for hybrid or electric vehicle batteries or other foreseeable applications are unfounded,” he wrote, detailing world resources that are much higher than had previously been calculated.
Not only that, said Anderson earlier this year, but the potential for current producers to increase their output is such that new entrants to the lithium market are going to find it very hard indeed to achieve viability. If all of the current evaluation and development projects actually came on stream, both from new and existing producers, lithium supply could virtually treble by 2020, he added, with a noticeable upturn in output in the middle of the forthcoming decade. With demand at between 40,000 and 50,000 mt/y of lithium and supply potentially above 65,000 mt, there is clearly little chance of a balanced market in 10 years time, let alone one that favors producers.
To summarize, Anderson offered the following scenario, a scenario that offers little in the way of encouragement for the world’s lithium-supply industry. The global recession pushed the industry into over-supply between 2009 and 2013, he stated. Pipeline projects will increase the supply-demand gap between 2013 and 2015, after which new development projects coming on stream will exacerbate the oversupply situation up to 2020. Serious peak oversupply will occur in 2017–2018.
TRU Group is predicting lithium prices will remain at current levels for some time to come, with long-term stability at relatively low levels also probable. “There is nothing in the horizon that would suggest any price escalation,” he said. “Indeed, most signs suggest the contrary.”
If this is the case, the auspices for lithium producers are shaky at best, and will depend to a large extent on public acceptance of the electric car as a viable transport option. Future oil prices and government incentives over the cost of electric vehicles will both have a major role to play in that area; depending on how these pan out, the world’s lithium companies may have an uneasy time over the next few years.
Anderson, Edward R., Shocking Future Battering the Lithium Industry through 2020, TRU Group, presentation to 3rd Lithium Supply and Markets conference, January 2011.
Baylis, Robert, The Lithium Market: 2009 Review and Outlook. Roskill Information Services, presentation to 2nd Lithium Supply and Markets conference, January 2010.
Evans, R. Keith, Lithium Abundance—World Lithium Reserve, 2008; http://lithiumabundance.blogspot.com/
Kunasz, Igor E., Lithium Brines and Pegmatites, TRU Group, presentation to 3rd Lithium Supply and Markets conference, January 2011.
Roskill Information Services, The Economics of Lithium, 11th edition.
Tahil, W., The Trouble with Lithium, Meridian International Research, 2007.