The United States is vying to become competitive in global lithium production as demand picks up for the “critical mineral”. Although a commonplace alkali metal, lithium is becoming known in the energy and mining sectors as ‘white gold’ due to its central role in rechargeable batteries. Demand for lithium-ion batteries has skyrocketed and is projected to continue growth at a steady clip thanks to the technology’s pivotal role in decarbonization efforts, most notably for powering electrical vehicles and enabling short-term energy storage.
The International Renewable Energy Agency (IRENA) estimates that lithium demand for battery-making alone will increase ten-fold between 2020 and 2030. Moreover, a 2023 report from Popular Mechanics calculated that “an electrified economy in 2030 will likely need anywhere from 250,000 to 450,000 tonnes of lithium.” That is a mindblowing sum. For reference, “In 2021, the world produced only 105—not 105,000—tonnes.”
The rising importance of lithium for global energy security opens up new markets for lithium producers, but it also poses new challenges for geopolitics, as currently just a few countries – most notably Australia, Chile, and China – control the vast majority of the global lithium supply. China alone refines 60% of the world’s lithium.
The United States does have considerable proven lithium reserves of its own. However, there is only one operational lithium plant in the entire country – Nevada’s Silver Peak facility. If the United States wants to boost its electric vehicle and renewable energy production capacity without relying on China for its lithium supply, rapid expansion of domestic lithium production will be critical.
Both public and private interests have started to throw their weight behind U.S. lithium production in recent years. The Biden administration earmarked more than $407 million for domestic exploration and production of lithium through the Inflation Reduction Act, and now some of Big Oil’s biggest names are investing in homegrown lithium production as well.
ExxonMobil’s Dan Holton recently told the Economist in June that a “material” portion of the $20 billion that the oil supermajor has earmarked for low-carbon investments from 2022 to 2027 will be funneled to the lithium sector. “By 2030 the company hopes to produce enough lithium to supply 1m electric vehicles a year,” the Economist reports.
An area of key interest for ExxonMobil and other lithium production hopefuls is the Smackover Formation, a geologic formation that spans the width of Arkansas. The formation is extremely rich in natural lithium brine and is estimated to hold over 4 million metric tons of lithium. “Lithium resource quality is really what makes this a great region,” Wesley Hamilton, CTO and vice president of research and technology at Albemarle, the world’s biggest lithium producer, was recently quoted by CNBC. “It comes down to two things: the concentration of lithium and the ability to extract it efficiently from the brine.”
With the ability to provide sufficient power for many millions of electric vehicles and other lithium-ion-battery powered devices, Arkansas’ Smackover Formation is now the site of a 21st century white gold rush. Exxon Mobil purchased 120,000 acres in the Smackover Formation last year and is targeting battery-grade lithium production by 2027. “The company said it will produce enough lithium to supply the manufacturing of more than 1 million EVs per year by 2030,” CNBC reports. Koch Inc. has also poured $100 million into Standard Lithium to expand its Direct Lithium Extraction (DLE) facility in El Dorado, Arkansas.
Ironically, all of these investments are coming at a time when lithium demand is dipping and prices are “falling precipitously” due to overproduction, overestimated EV growth trends, and competition from other battery technologies. But investors seem sure that this is a fluke rather than the rule, and have continued to invest in lithium hand over fist. After lithium prices correct and market volatility is ironed out, lithium is expected to generate high rates of return for its investors. And Arkansas, for its part, can expect to receive a windfall.
By Haley Zaremba for Oilprice.com
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