Project Blue looks at the evolving role of lithium in energy transition, and the opportunities and challenges that make lithium this decade’s key critical raw material
This month we are taking a closer look at the poster child of energy transition materials, Lithium. Lending its name to the lithium-ion (Li-ion) battery, the expansion in the lithium industry over the past decade has caused owing pains, as supply has struggled to keep pace. Tight market conditions during the mid-2010s and early 2020s have resulted in extreme volatility in spot prices, with annual average prices increasing ten-fold between 2020 and 2022.
The lithium industry remains is in the midst of a transition, from one being led by slower-growth industrial applications, such as ceramics and greases, to one at the cutting edge of technology in the automotive and renewable energy industries. As governments globally strengthen policy supporting the transition to low/zero emissions transportation and a zero-carbon economy by 2050, there will be continual growth in the need for economically viable energy storage technologies, with Li-ion batteries now taking centre stage.
What role does lithium play in energy transition?
Lithium is a vital component of Li-ion batteries, used in the production of cathode, electrolyte and some anode materials within a Li-ion cell. Lithium ions within a Li-ion cell transfer from the anode to the cathode via an electrolyte during discharge, allowing for electrons to flow in the opposing direction via the collectors powering an attached electrical device. Though first developed in the 1970s, the commercialisation of Li-ion batteries took-off in the 1990s with Sony and Asahi Kasei producing the first cells for use in portable electronics. As Li-ion technologies have been improved, and their cost of production has reduced, the use of Li-ion batteries became more widespread in the 1990s and 2000s. Since 2010, Li-ion batteries have become the technology of choice for electric vehicles, due to their high energy density and suitable voltage. The growing adoption of electric vehicles and supporting policy by governments globally has significantly increasing the scale of demand for lithium. In 2022, automotive applications accounted for 80% of total Li-ion capacity consumed, compared to just 43% in 2015.
Deployed Li-ion capacity by automotive and other end-use applications (2015-2022)
© Project Blue, 2023
Within a Li-ion battery, the majority of lithium contained is within the cathode active material, accounting for over 92% of lithium consumed in battery applications during 2022. Electrolyte salts formed the next largest consuming component in 2022 at 6.5% of total battery consumption, with the remaining 1.5% consumed within the production and treatment of anode active materials.
There is a wide variety of cathode active materials used in Li-ion technologies, though lithium is a constant in their composition. The most common cathode materials used in Li-ion technologies are lithium-nickel-cobalt-manganese-oxide (NCM), lithium-nickel-cobalt-aluminium-oxide (NCA) and lithium-iron-phosphate (LFP). The lithium content of NCM and NCA cathodes is roughly 7% Li, with LFP cathodes containing a lower content at around 3% Li. Even within these cathode material types, there have been significant changes in the ratios of elements contained within them to achieve different performance properties. The most notable change since 2015 has been within NCM type cathode materials, as the demands of consumers in the automotive industry have pushed the boundaries of cell energy density and performance. Increasing the nickel content of NCM cathode materials was identified as a way to improve its energy density, which saw manufacturers produce cathode materials with greater and greater nickel contents. The ratio of nickel, cobalt and manganese is typically shown via three numbers following NCM, such as 111, 523 and 622. The push for higher energy density saw a transition from NCM523 being the main cathode chemistry used in automotive applications in the mid-2010s, to NCM622 and NCM811 being widely used by 2020.
Concerns over the safety of Li-ion cells using higher nickel cathodes and volatile prices of nickel, cobalt and lithium however led to growth of other cathode chemistries, principally LFP (lithium-iron phosphate). Despite its lower energy density, the lack of nickel, cobalt and manganese in LFP reduced raw material costs compared to NCM and NCA type cathode materials by weight and also removed ESG concerns surrounding the sourcing of these materials. These factors combined with much greater safety aspects saw LFP increase its market share, particularly within the Chinese market between 2019 and 2022.
Distribution of Li-ion battery capacity by cathode type (2013-2022)
© Project Blue, 2023
The evolution of cathode chemistries has had a dramatic impact on the lithium industry, as different feedstocks are required to produce different cathode materials. Lithium carbonate is used as the principal feedstock for LFP and lower nickel (<60% Ni ratio) NCM cathode materials, because of carbonate’s lower cost, improved availability and better shelf-life. For higher nickel cathode materials however, lithium hydroxide is required, to avoid generation of “free lithium” during cathode production. Free lithium presents as lithium oxide, carbonate or other lithium compounds during cathode production process, increasing the acidity and viscosity of cathode slurries during mixing. When this cathode material is then used in Li-ion cells, this can adversely impact performance and safety during the cells’ charge/discharge.
As consumers have turned to high-nickel cathode materials to achieve higher energy density Li-ion battery cells since 2017, demand for lithium hydroxide has surged by 61% per year. During the mid-2010s, there were only a handful of producers capable of producing “battery grade” lithium hydroxide. Since 2017, capacity expansions and new operations have increase battery grade lithium hydroxide production capacity more than 5-fold. Since 2020, increased production of LFP cathodes has strengthened demand for battery grade lithium carbonate, which has maintained its position as the most widely consumed lithium compound in Li-ion battery applications. The future progression of cathode chemistries, particularly in automotive applications, is expected to see a continued growth in the use of both LFP and high-nickel NCM/NCA cathodes. High nickel cathodes are expected to target luxury and performance vehicles, while LFP cathodes will be more widely used in lower-cost models for mass production. Novel cathode materials including lithium-iron-manganese-phosphate (LMFP) and very-high nickel cathode materials such as NCM90 (90% nickel ratio) will also become more widely used in the period to 2030. However, lithium compounds will remain a fundamental component of all Li-ion technologies.
What makes lithium critical?
There are three main supply chains which produce lithium products for the range of end-use markets; mineral extraction and conversion, lithium brine extraction and processing, and recycling.
The mining of lithium mineral concentrates is heavily centred in Australia, which accounted for 79% of global lithium mineral production. Spodumene is the most common lithium mineral targeted for extraction, with several major operations located in Australia, Brazil and China. The largest of these is the Greenbushes mine operated by Talison Lithium, a joint venture between Sichuan Tianqi Lithium, IGO and Albemarle, in Western Australia. The Greenbushes mine has produced spodumene mineral concentrates since 1985, and formed 41% of global mine production in 2022.
Lithium mine supply by country (2022)
©Project Blue, 2023
In recent years, the development of projects targeting other lithium minerals such as lepidolite and petalite has grown, as increasing demand for feedstock has gathered pace. Several lepidolite operations and significant volumes of artisanal lepidolite mining ramped-up in 2022 as the availability of spodumene mineral concentrates to third party processors was tight and non-integrated processors sought alternative feedstocks. Lepidolite mineral mining has increased by 90% since 2020, with China being the dominant producer.
Though some may be used in ceramics, glass and metallurgical powder applications, the largest share of lithium mineral concentrates is converted to lithium compounds by hydrometallurgical processing. China is the largest mineral conversion centre, accounting for 97% of global production in 2022. As the mineral extraction and processing supply chain becomes more integrated, Western Australia is expected to become a key region for mineral conversion. Integration of the supply chain will erode Chinese market share, though China will remain a major industry participant as conversion facilities switch to process lepidolite concentrates from domestic Chinese sources.
Lithium brine operations are the largest provider of refined lithium compounds to the global market, accounting for 43% of production in 2022. Global production is dominated by SQM and Albemrale in Chile and by Allkem and Livent in Argentina, though China also produces lithium from brine operations with output reaching 56kt LCE in 2022. Lithium brine operations directly produce lithium carbonate, hydroxide and other compounds which may enter the battery industry if the required product specifications are met. For products that don’t initially meet specifications, compounds may be reprocessed and upgraded at processing facilities, with capacity predominantly located in China and the USA.
Refined lithium supply by source material (2022)
©Project Blue, 2023
Finally, lithium is also recovered from the recycling of end-of-life material and production scrap, particularly from the Li-ion battery industry. Recycling has historically been a relatively insignificant source of lithium supply, accounting for roughly 1% of production in 2020. Since 2020, lithium supply from recycling has more than doubled, though it still accounts for only 2% of total lithium supply. Policies and legislation that support collection, recycling and reuse of lithium in the battery industry are set to boost lithium supply from recycling. Growth in recycled supply will outpace the growth in primary production in the period to 2030 and more than triple its share within global lithium supply.
Despite the large number of lithium projects in development and the increasing proportion of supply set to come from recycling, the lithium industry’s ability to keep-pace with rapid demand growth in technologies key to energy transition remains in question. With several projects experiencing delays linked to technical, permitting and financing setbacks, the pipeline of new lithium capacity will be increasingly thinned out over the coming decade.
The geographical concentration of the lithium industry in three countries – China, Australia and Chile – has created a supply chain at risk of disruption, with several large consumers heavily dependent on imported materials. Geopolitical have further restricted the availability of where lithium can be sourced, in terms of country of origin, and in future, in terms of the carbon emissions generated during its production. Historically the supply risk for lithium has been considered low to medium in criticality assessments, though more recent assessments have shown increased concern, with lithium playing a crucial role in high growth energy transition applications. The EU Critical Raw Materials assessment nearly doubled the supply risk of lithium between its 2017 and 2023 publications.
Overall, the growing economic importance of lithium feedstocks, challenges in supply keeping pace with demand, and increased legislative regionalisation of the supply chain all point to lithium remaining a key critical material globally for the foreseeable future.
By David Merriman
