The race to produce lithium

Summary

The Race to Produce Lithium: A Comprehensive Overview

Podcast: The Indicator from Planet Money
Host: Darren Woods and Adrienne
Episode Title: The Race to Produce Lithium
Release Date: January 15, 2025

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Introduction: The Critical Role of Lithium

In the January 15, 2025 episode of The Indicator from Planet Money, hosts Darren Woods and Adrienne delve into the pressing issue of lithium production in the United States. Lithium, the cornerstone of modern battery technology, is essential for powering everything from smartphones to electric vehicles (EVs) and large-scale grid batteries. Darren Woods introduces the topic by highlighting lithium's prevalence, stating, “More than 90% of the batteries in North American electricity grids are lithium ion” (00:26).

Why Lithium is Invaluable

Adrienne underscores lithium's unique properties that make it indispensable for battery production. “The reason lithium is so prized for batteries is that it's the lightest metal there is,” she explains (00:26). Darren humorously adds, “Yeah. So not heavy metal, light metal,” further emphasizing its lightweight nature, likening lithium to the “Bon Jovi of the periodic table” (00:35).

Historical Context: U.S. Leadership and Decline in Lithium Production

The episode traces the United States' historical role in lithium production. Ernest Scheider, author of War Lithium, Copper and the Global Battle to Power Our Lives, provides critical insights: “From the period of time after the war into the maybe the 1980s, about a third of the world's lithium was produced here in the United States. And yet as we sit here today, fast forward to today. Only 2% of the world's lithium is made in the U.S.” (03:08). This dramatic decline is attributed to the closure of significant mines, such as the Kings Mountain Mine in North Carolina in 1988, primarily because lithium extraction became more economically feasible in Australia and Chile.

China's Ascendancy in Lithium Processing

A pivotal point in the narrative is China's strategic move to dominate lithium processing. Scheider explains, “China realized that whoever controls the production of lithium and other critical minerals will control the 21st-century economy the way that control of oil defined the 20th-century economy” (01:09). The hosts elaborate on how China not only mines lithium but also leads in processing it for battery production. This dual control has positioned China as a global powerhouse in the lithium supply chain.

Collaborative Yet Competitive Dynamics

Despite geopolitical tensions, there is a layer of cooperation between American and Chinese companies. Eric Norris, Albemarle’s Executive Vice President and Chief Commercial Officer, points out, “Eric Norris is Albemarle's executive vice president and chief commercial officer” (02:52). Albemarle, an American company, has engaged in joint ventures with Chinese firms and supplies lithium to battery manufacturers, including those in China (05:09). However, the ongoing trade war and restrictions imposed by both nations, such as China’s export bans on critical elements for semiconductor manufacturing, have heightened U.S. anxieties about relying on Chinese lithium (05:30).

Efforts to Rebuild Domestic Lithium Production

In response to these geopolitical challenges, the U.S. government has initiated measures to bolster domestic lithium production. Adrienne notes, “Congress made it a point to try and build up domestic lithium production. It was part of the bipartisan infrastructure law and the Inflation Reduction Act that was passed” (06:07). Albemarle received a substantial $240 million grant to restart the Kings Mountain Mine, signaling a significant government push to revive U.S. lithium manufacturing.

Challenges Facing U.S. Lithium Initiatives

Despite substantial investments, Albemarle faces numerous hurdles. Norris admits, “It's complicated,” highlighting the multifaceted challenges involved (06:37). The primary obstacles include:

• Economic Viability: The current global oversupply has driven lithium prices down by approximately 90%, making it economically unfeasible to restart existing mines or develop new ones (08:04). This price volatility poses a significant risk for investors and companies alike.

• Infrastructure and Investment: Reestablishing lithium production requires not only mining operations but also the construction of processing facilities, entailing investments upwards of a billion dollars (06:41).

• Demand Uncertainty: With most EV production centered in China and Europe, there is limited domestic demand in the U.S. for processed lithium, potentially necessitating exports and adding logistical costs (06:52).

• Environmental and Community Opposition: New mining projects often encounter resistance from environmentalists concerned about habitat destruction and contamination from toxic chemicals. Additionally, garnering support from indigenous communities remains a persistent challenge (07:30).

Economic Fluctuations and Market Dynamics

Adrienne highlights the inherent volatility in commodity markets, using lithium as a prime example. She explains, “Everywhere prices are volatile, and there can be these big price spikes, like there was a few years ago when lithium supply could not keep up with demand” (08:04). Such fluctuations complicate long-term planning and investment in lithium production infrastructure.

Future Prospects and Conclusion

The episode concludes on a reflective note, drawing a parallel with Bon Jovi’s iconic song to emphasize lithium’s centrality to modern life. “In the words of Bon Jovi, it's now their life,” Adrienne quips, underscoring the indispensable role of lithium in current and future technologies (08:57).

Despite significant efforts and investments, the U.S. lithium industry remains at a crossroads. The interplay of geopolitical tensions, economic challenges, and environmental concerns continues to shape the trajectory of lithium production in America. As the race to secure lithium resources intensifies, the outcomes will have profound implications for the global economy and the future of sustainable energy technologies.

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Notable Quotes:

• Darren Woods: “More than 90% of the batteries in North American electricity grids are lithium ion.” (00:26)
• Adrienne: “The reason lithium is so prized for batteries is that it's the lightest metal there is.” (00:26)
• Ernest Scheider: “From the period of time after the war into the maybe the 1980s, about a third of the world's lithium was produced here in the United States. And yet as we sit here today, fast forward to today. Only 2% of the world's lithium is made in the U.S.” (03:08)
• Adrienne: “If we were to be processing all of Kings Mountain today, most of that product would have to be exported because there isn't demand here for it. Most of those batteries aren't made here. They're made somewhere else.” (06:52)
• Adrienne: “Everybody has been singing at the bars all these years.” (04:28)
• Darren Woods: “It's now their life.” (08:57)

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This episode offers a nuanced exploration of the lithium supply chain, highlighting the intricate balance between economic feasibility, geopolitical strategy, and environmental stewardship. For listeners interested in the intersection of economics, technology, and global politics, this comprehensive analysis provides valuable insights into one of the most critical commodities of the 21st century.

Transcript

[NPR Announcer]

NPR.

[Darren Woods]

This century, lithium is a hot commodity. That's thanks to the lithium ion battery used in phones, electric vehicles and grid scale batteries. More than 90% of the batteries in North American electricity grids are lithium ion.

[Adrienne]

And the reason lithium is so prized for batteries is that it's the lightest metal there is.

[Darren Woods]

Yeah. So not heavy metal, light metal.

[Adrienne]

Exactly. It's less Pantera, more Bon Jovi. Light, light metal.

[Darren Woods]

Yes, the Bon Jovi of the periodic table. But unlike Bon Jovi, it is not all American. Lithium mining happens across the globe, but when it comes to processing, an estimated two thirds is processed Chinese companies.

[Ernest Scheider]

China realized that whoever controls the production of lithium and other critical minerals will control the 21st century economy the way that control of oil defined the 20th century economy.

[Darren Woods]

That's Ernest Scheider. He's the author of the War Lithium, Copper and the Global Battle to Power Our Lives. He says the US Was once a lithium pioneer. Now it's trying to play catch up. This is the indicator from Planet Money. I'm Darren Woods.

[Adrienne]

And I'm Adrienne. Madam. Today on the show, we conclude our three part series on grid scale batteries by looking at a race to produce the battery's key ingredient here in the US It's a story that starts with the development of the nuclear bomb and arrives at today where geopolitics is colliding with environmentalists, local communities and fickle economics.

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[Darren Woods]

Lithium mine still running in the US It's a small mine in Nevada run by a company called Albemarle. And the story of lithium in America can be told through this company. Eric Norris is Albemarle's executive vice president and chief commercial officer.

[Ernest Scheider]

We've been producing lithium since the 1930s in the U.S. eric says that as.

[Adrienne]

The Manhattan Project progressed During World War II, lithium was identified as an important fuel for nuclear bombs. It also became used for nuclear power. It was a strategic element for the US to produce, a really high priority during that time. That meant huge government subsidies.

[Ernest Scheider]

From the period of time after the war into the maybe the 1980s, about a third of the world's lithium was produced here in the United States. And yet as we sit here today, fast forward to today. Only 2% of the world's lithium is made in the U.S. so clearly the.

[Adrienne]

U.S. has, like, given up a lot of ground when it comes to lithium production.

[Darren Woods]

Yeah, a huge drop. In 1988, a big mine in North Carolina closed. It was called Kings Mountain Mine, and it was owned by a predecessor of Eric's company. This was the nail in the coffin for the US As a significant lithium producer. The main reason was that lithium was much cheaper to extract from the great deserts of Western Australia and Chile.

[Adrienne]

Those countries were rising to meet a new use that really began in 1991. That's a year when Sony introduced the first rechargeable lithium ion battery to the market, which it used in its camcorders. Then, with the rise of cell phones, it was time for the Bon Jovi of the chemical table to step into the spotlight.

[Darren Woods]

I think it's because of his hit song, Lithium on a Prayer.

[Adrienne]

Yes, I'm sure that's what everybody has been singing at the bars all these years. I just didn't notice it before.

[Darren Woods]

While the US Was focused on debates around energy independence that mostly revolved around oil, the Chinese government was thinking differently. The Chinese Communist Party started heavily subsidising lithium mined or processed in China. Now the mines are still overwhelmingly based in Australia and Chile, two countries friendly with the US but getting the lithium out of the ground is only the first step. The processing to create lithium that's ready for batteries is overwhelmingly Chinese.

[Adrienne]

Now, to be clear, the story of China's rise in lithium extraction is not purely about competition with the U.S. it's also about cooperation. Eric Norris Co. Albemarle is American, and it's done a range of joint ventures with Chinese companies. And Albemarle sells its lithium to battery manufacturers, which includes companies based in China.

[Darren Woods]

But some people in the US are anxious about the lack of domestic lithium production. As you may have noticed, relations between the US And China aren't great at the moment, especially after the trade war between the two countries. There is a fear that China could restrict access to lithium. The Chinese government did this with other minerals as recently as in December. In response to US restrictions on China's semiconductor manufacturing, the Chinese government placed new rules on three important elements in making semiconductor chips. China has now banned these elements from being exported to the US and this.

[Adrienne]

Is why Congress made it a point to try and build up domestic lithium production. It was part of the bipartisan infrastructure law and the Inflation Reduction act that was passed. And because of these acts, a few years back, the government awarded Albemarle $240 million to restart the Kings Mountain lithium mine in North Carolina. But what happened next is sort of instructive about the difficulties governments face when they get involved in markets for commodities like lithium. Eric Norris from Albemarle says, it's complicated.

[Ernest Scheider]

We're big advocates of that, but there are challenges that have to be addressed.

[Adrienne]

He says not only would you have to restart the mine, but you'd also have to build a processing facility, and that could be a billion dollars. Plus also, there's this question of who the customers are.

[Ernest Scheider]

If we were to be processing all of Kings Mountain today, most of that product would have to be exported because there isn't demand here for it. Most of those batteries aren't made here. They're made somewhere else.

[Darren Woods]

Most electric vehicle sales are in China and Europe, so that's where most of the electric vehicle batteries are made. So shipping the lithium elsewhere to those battery factories would add costs, another issue in the US Mines like Kings Mountain also face opposition. Often, environmental advocates oppose destruction of endangered species habitats. Abandoned mines can become contaminated with toxic chemicals like arsenic. Opposition from indigenous groups is common, too.

[Adrienne]

Kings Mountain faces less of these headwinds than new mines because the old mine was already there. So the big damage is basically already done. But the fact remains that permitting is a big issue.

[Ernest Scheider]

Nothing happens without the community's engagement and support. We have a mine together and we don't have one. And so we have a community center. We have a team that engages with the community.

[Adrienne]

They're doing a lot of homework, but they're still not sure if they'll go ahead with restarting this mine.

[Ernest Scheider]

We're plotting how to do it now. We need the numbers to support it. The economics just don't support it now.

[Darren Woods]

A few years ago, when Albemarle was kicking off this idea, one tonne of lithium was selling for record amounts of money. Now those Chinese lithium processors are churning out plenty of lithium, and the price has fallen about 90%. This makes it harder for Albemarle to justify restarting the Kings Mountain mine, and it also worsens the economic case for other lithium proposals, like a big potential mine in Nevada.

[Adrienne]

And this dip highlights a key issue with all commodities. Everywhere prices are volatile, and there can be these big price spikes, like there was a few years ago when lithium supply could not keep up with demand. But those high prices don't usually last, especially when you have governments around the world subsidizing production. One winner, at least for now, is the people making and buying batteries.

[Darren Woods]

In the words of Bon Jovi, it's now their life.

[Adrienne]

Cue the chorus. This episode is produced by Cooper Katz McKim, with engineering by Gilly Moon and Jimmy Keeley. It was fact checked by Sierra Juarez Cake, and Ken edits the show and the indicators of production of NPR.

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