Fox Business / YouTube Gordon Chang on US China trade...
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The initial cost of electric vehicles still tends to higher than that of conventional internal combustion (ICE) vehicles, enough so that EVs are essentially priced out of the market for economy cars. But electric cars are actually easier to make, with electric motors costing much less to manufacture than their gas equivalents and requiring many fewer supporting systems. The reason that electric cars cost so much in 2019 is because lithium batteries cost so much. And the reason that lithium batteries cost so much is in large part because lithium costs so much. But if a report in the South China Morning Post is correct, that could be about to change.

You may have seen pictures of “lithium mines” circulated on social media, especially by people who want to beat their chests over the idea that electric vehicles are somehow more environmentally destructive than their ICE equivalents. Those images are universally fakes. Generally they show mines for other metals such as copper or iron. They never show lithium. Because the great bulk of lithium isn’t mined at all. It’s produced from highly salty brines, often from salt pans found in desert regions. In the U.S. there is lithium production from brine pools in Nevada.

Lithium isn’t super rare. Sure, it makes up only about 0.0007 % of the Earth’s crust, but a lot of things we use regularly are scarcer than that. However, we do quite a lot. If you’re reading this on a phone or tablet, that device includes a lithium battery. So do laptops. So do pacemakers. So does just about any device that needs to maximize energy storage. Until someone manages to take one of the frequently-reported, rarely-producible new battery technologies to market, lithium is it. The identified reserves in the form of brine are about 16 million tons worldwide, which would be enough for almost 400 years at the current rate of use. But as the use of lithium for electric vehicles, and electrical storage, is increasing, so are lithium prices. The pale silver-gray metal, fetched less than $2,000 a ton in 2005. It was $18,000 a ton in 2018 and the current market price is still edging upward.

Much of that cost increase—the price has doubled in just the last year—has been offset by improvements in the cost of making batteries. Manufacturers like Panasonic and Tesla have greatly expanded their production, improved their technology, and driven down the cost per kilowatt. But unless the price of lithium can be addressed, they can’t really take advantage of the genuine simplicity of electric cars to makes them as cheap or cheaper than competitors.

And that’s just what China claims to have done.

In an article from May 14, the SCMP reports on an effort by the Chinese government to more easily separate lithium from other metals that are found in the same brines where it is produced. Currently, sorting lithium salts away from salts formed by magnesium requires multiple steps as the compounds are both physically similar and hard to separate with common chemical processes.

China claims to have greatly simplified that process. Not only that, they claim this new, easier means of extracting lithium is already in commercial use inside China. If true, it would allow them to produce lithium from lower quality brines, and generate more lithium more quickly. The result could be that lithium produced from China can undercut the world market by a huge factor. That in turn would mean that both electric vehicles and electric vehicle batteries from China could dominate the market—just as China already dominates current production of lithium batteries used in most devices, even though they currently import much of the lithium.

There are definitely political implications on both sides of the Pacific. This announcement comes at a time when China is threatening to use its access to some materials, particularly rare earth minerals, as leverage in the ongoing trade war initiated by Donald Trump. The “cheap lithium” announcement could be real … or it could be a ploy to up the pressure. After all, lithium is becoming one of the most critical elements in the marketplace, and China has also made claims about the amount of the metal it controls (i.e. “more than half the world’s reserves”) that are wildly off base from the estimates of geologists outside China.

The world is not about to hit “peak lithium.” Even if the EV industry kicks into high gear and captures a very large portion of the auto market, the world is not going to run out in the near future. That’s especially true since, unlike fossil fuels, lithium can be recycled to use again and again. But demand for lithium is genuinely putting a strain on existing producers and the balance of supply and demand is driving the cost ever upward. A process like the one described by China wouldn’t just make lithium cheaper, it would make it possible to produce lithium from sites that are currently not economic. There are potential ripples in every direction.

Lithium prices are certainly not the only factor in electric vehicle costs. In 2010, when lithium was going for  $4,300 a ton, EV battery prices were running over $600 per kilowatt/hr. By 2018, multiple manufacturers claimed to have gotten their costs under $200 per kilowatt/hr, even though lithium had gone up by 450%.

But it is going to be very difficult to bring the price of lithium batteries down significantly more, without also lowering the price of lithium. And with the demand going up, that means there’s a need for both more and cheaper lithium.

That’s directly affecting legislation in the Senate, where Republican Lisa Murkowski and conservative Democrat Joe Manchin teamed up to introduce the American Mineral Security Act at the beginning of May. That act would write into law a list of “critical minerals” that was regularly updated. Sites that could produce those critical minerals would get reduced compliance requirements for permitting and operations. In other words, they would get a break on environmental assessments and impacts. Lithium can be expected to top that list.

Oh, and the bill also includes what the pair call “common sense permitting reforms” for use of federal lands, as well as some language that seems suspiciously designed to stop the development of local power production from community solar installations rather than big plants powered by coal or methane. It’s a bad bill, and that last part is likely why coal-obsessed Manchin stuck his name on the top.

But what’s interesting about the American Mineral Security Act—which stands about as much chance of passing in the House as Mitch McConnell does of doing something reasonable in the Senate—is that Murkowski and Manchin recognize that lithium and a few other minerals are becoming so critical to our economy and future, that they may just be able to hide a little fossil fuel protection scheme in the details. With the pressure China is applying in the trade war, and increasing concern about China’s moves to lock up reserves around the world, it’s likely that the need for these minerals is going to become a major political issue; one that is almost certain to get play in the 2020 election cycle.

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This is a Creative Commons article. The original version of this article appeared here.


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