Inside the global race for lithium batteries | FT Film
[Music] Ro lithium is at the center of the energy transition crucial to the production of batteries for electric cars in this film we'll take you on a journey from Chile to England to Norway to explore two massive questions hanging over this industry and everyone who invests in it can it increase production enough to meet surging Global demand and can it do so while minimizing negative social and environmental impacts Chile has the world's largest reserves of lithium the bulk of its production is done by the Santiago listed company sqm and by far its biggest mine is here at the salad de atakama a giant Salt Flat in the middle of Chile's atakama desert the driest place in the world outside Antarctica this Salt Flat formed over hundreds of thousands of years as rainwater flow down from the nearby mountains collecting minerals including lithium along the way under its surface is brine extremely salty water with a small but valuable lithium content the braine is put into the first of a series of pools where the water begins to evaporate away as it passes through each pool the braine becomes more concentrated therefore with a higher proportion of lithium as more water evaporates and other minerals are removed at the last of the pools here at the cellar the lithium content reaches nearly 5% the brine is then loaded into trucks that take it to sqm's processing plant outside the coastal city of antofagasta 200 km to the Southwest there it is turned into sacks of lithium carbonate and lithium hydroxide which are then shipped to manufacturers mainly in Asia for use in battery production this plant accounts for nearly a fifth of the world's lithium processing capacity [Music] but while the lithium sector has put Chile at the center of one of the world's highest growth in Industries some people in the region surrounding the salad atakama such as entrepreneur Rosa Ramos are worried that brine extraction by lithium companies could be depleting their water resources sqm says that it has been careful to minimize the environmental impacts of its activities and that studies carried out by its own experts and by outside academics show no grounds for concern about negative effects on local communi Water Resources but the company acknowledges that while it has been investing in studies on this question and providing data to outside researchers there is a shortage of truly dependent information and for scientists like Mariana cetto who has worked extensively on the salad deama and who we met up with in Chile's capital of Santiago without that independent data from the government or from other parties unaffiliated with the mining industry it will be impossible to put this matter to rest it's quite difficult to have like objective information to to understand if there's been there is an impact or not for example in Sal salad dama the models for me are quite convincing but I still have my small doubts and to able to be to solve these doubts I don't have the information so I just have to trust their models and understand that they are coherent and in that from that point of view in Salama particularly the models and the information they show would show that there isn't an impact from the brain extraction not even in the lagoons and not even on the on the freshwater uh availability for investors in financial hubs like London who are pumping billions into the supply chain for lithium and other critical minerals concerns about sustainable production are high on the agenda this sector offers huge potential rewards but at a time when investment managers are under massive scrutiny over their environmental social and governance credentials it comes with big big risks too Brian mennel is the founder of techmet an investment company that has acquired stakes in several businesses involved in the extraction and processing of lithium as well as other minerals crucial to the energy transition mining Parts nature is not sustainable it's a you're exploiting a finite resource and nothing that develops a natural source is without some environmental impact and carbon footprint um however you know I think it's it's wrong to see the mining industry or the lithium production industry in particular as one that can't be well governed and transparent and low environmental impact and low carbon footprint and a lot of that what we're doing as techm is to ensure that all of our projects meet very high standards menel says that the energy transition and the surging demand it is bringing for metals like lithium presents a once in a century investment opportunity Tesla are to reach their target of producing 20 million electric vehicles a year by 2030 that alone would require almost seven times the present total Global annual supply of lithium and that's before GM or Ford or VW or the Chinese who will continue to produce 2/3 of the world's batteries and 2third of the world's electric vehicles and are growing quicker than us and have a 15year head start in managing the supply chain you know there's no model or no scenario where these Metals do not have to go up in price much much further and stay up in price much much longer and as countries around the world begin to worry about obtaining sufficient supplies of these Metals menal says far more investment will be needed to ensure energy Security in particular he says China has an unhealthily large market share in the production of lithium ion batteries and in the refining of lithium chemicals for them China's been building critical minerals processing capacity over the last 15 20 years while the rest of the world was sleeping and and as a result of that they have economies of scale that make them competitive to a point which creates massive challenges for the rest of the world to balance or or reduce that's the one factor the other factor is the fact that the Chinese state in the pursuit of this long-term strategic objective of dominating the inputs into the energy transition have been prepared to subsidize the low margin elements of the supply chain in order to control the supply chain major economies throughout the world have been scrambling to drive greater investment into lithium production in the US Joe Biden's recent inflation reduction act has provided powerful Financial incentives for new projects in this space the European commission has followed up with a proposed new law of its own to drive production and processing capacity for lithium and other critical minerals so to give us more time to prepare I'm announcing today that we're going to ease the transition to electric vehicles and while the UK government has recently cut back several major clean energy policies it says it is committed to increasing the country's domestic production of lithium to get a sense of its chances of doing so we headed down to the coastal County of Cornwall in Southwest England Cornwall has a mining history dating back to the Bronze Age but the sector has been a shadow of its former self since the late 19th century now some in the county are daring to hope for a mining Revival driven by two startups that are working to extract lithium from beneath the Cornish soil one of them is British lithium run by Australian father and Sun team Rodrick and Andrew Smith Australia is currently the world's biggest producer of lithium accounting for more than 40% of global extraction in 2022 but rodick Smith a veteran of the Australian mining sector says that Europe including the UK is a more attractive investment proposition I explored four discovered and built a number of mines in Western Australia uh four or five of them and Australia is good to me it's got a booming mining industry and of course the lithium industry is booming there now too but I think one thing that's missing Australia is not very good at adding value to Natural Resources it's a it's a quarry of the world but they have no car industry for example they don't make a single car in Australia so they're not going to have a car battery plant and the lithium mines that are being built there it's not going into batteries it's all going to China where they make batteries and make cars in contrast argue The Smiths their operation in Cornwall will be well placed to serve manufacturers in their region including a new battery Factory to be built by India's tartar Motors in Somerset 100 miles to the Northeast the lithium that occurs in Corall is unique in the world so we ended up building a pilot plant behind us which was completed in 2021 and it uses a physical separation methodology to remove the lithium mic out of the rock for physical separation make a concentrate we then heat that up dissolve it in pure water change the ph and refine it into the final battery grade lii carbonate we received Government funding to for R&D and for building toward building this pilot plant and one of the requirements of the government funding was that we have a independent Benchmark comparing our process and our actual development against existing industry and the carbon emissions are less than half the best current producing hardw mine and the water consumption is is is way ahead of you know certainly looking at the brine people so it does stack up extremely [Music] well as the demand for lithium surges and producers like the Smith's race to increase Supply trading venues like the London Metal Exchange could play an important role in keeping this Market running smoothly the lme traces its history to 1571 and is one of the few exchanges in the world still to rely on the open outcry system of trading between individuals on its floor in the city of London probably over the next uh 10 years most Market commentators expect the the the the lithium Market in size to perhaps quadruple currently however almost no lithium trading is done on open markets like the lme most sales are made through long-term agreements between producers and customers either battery makers or increasingly car makers themselves pricing isn't particularly uh transparent producers and consumers typically uh enter into bilateral negotiations and use fixed prices that are set by The Producers which is quite different to what you see uh in more mature markets like copper or aluminium where the industry typically references um index prices I think it's fair to say there is a huge amount of uncertainty around how and de demand and Supply will come into balance uh in future and you can see that um in the price volatility uh in recent years which has been very very high maybe just to put it into perspective uh at the beginning of this year the the lithium hydroxide price was around $85,000 um dollars per ton right now it's trading at closer to 28,000 so in less than a year the prices come off by 2/3 um but in Prior years has as much as quadrupled in a single year Martin argues that the shift to index-based pricing will help car makers and Battery producers to better manage these price fluctuations and give them greater flexibility and security of Supply the lme is also looking to address concerns about sustainability by introducing a passport system that guarantees minimum standards of Social and environmental responsibility more than half of lme Brands um are starting to publish this information and this can then be looked at by Downstream uh consumer consumers to really have confidence that the you the green EV that they're driving actually has a low production carbon footprint so the energy transition is undoubtedly going to have a a very large impact on the global Metals market and by consequence on the on the LM as well um perhaps the biggest impact since the the rise of China um in the early 2000s which had a a huge impact on on metal demand Chile's huge reserves of lithium have given this country a chance to play a central role in the global energy transition and the government here in Santiago now needs to make sure that this delivers real economic benefits for the country as a whole in April 2023 the government of president Gabrielle borich a left-leaning 37-year-old announced a new lithium strategy that would bring major changes for the industry most notably all new lithium projects would need to be carried out through a partnership between private sector businesses and a state-owned mining company a move that was criticized by some as a form of nationalization the new plan is a big deal for s qm whose current lease for lithium extraction expires in 2030 today we are estimating that the demand of lithium is around 930,000 ton this will be the demand of this year which is H 20% higher than last year and we are estimating that by 2030 the demand of lithium could reach 3 million tons it's some optimistic scenarios we even have up to 3.4 3.5 million tons so a lot of lithium is needed in the future that means that we will need Supply from every possible origin Chile definitely will have to be one of of the future Supply countries okay so that means that we need to grow and the policy that the Chilean government has announced in a way I see it as a a to put some some uh let's say clear rules of the game for future Supply uh from Chile the government strategy would also encourage new lithium operations to use new forms of technology such as direct lithium extraction which would remove lithium from brine at the site of extraction and then re-inject the processed liquid back into the brine body nothing has been 100% proven so you need to be 100% sure that things will work before engaging uh fully in adopting these new technologies and that's why I see it more as a compliment in the first years but that means that brain process which is already today very sustainable could become even more sustainable in the future it's not um as easy as you know we'll will'll pump here and re inject here it has to be we have to think where to inject at what depth will it will it compensate the pumping it's h from a hydrological point of view it's not it's not simple it's not clear whether B's government will be able to get its new plan through Parliament but it reflects a wider Race by countries around the world to benefit economically from the demand for critical minerals some members of Chile's indigenous population say that the new strategy May not address their concerns about the impacts of lithium mining Ariel Leon a lawyer from Chile's North has been helping a community in Chile's marunga region in the southern part of the atakama to win legal rulings against lithium extraction near that land IND in the region of the salad de atakama sqm has put some of its lithium profits towards local community projects like this new hotel which will be owned and run by the local community of toono but Community leaders here say they still want to see more effort from the government and mining companies to engage in consultation and some argue that Shoppers worldwide need to start thinking about how to reduce their consumption of resources as well as their carbon emissions for [Music] underground deposits are not the only source of lithium the more the electric vehicle Market grows so in due course does the supply of used car batteries like the ones behind me which can be crushed and separated into their constituent elements this facility in Southern North way is the biggest battery recycling plant in Europe it's the main operation of hedr volt a joint venture between Swedish battery maker northvolt and Norwegian aluminium producer nor hedro for several years thanks to strong government incentives most new cars sold in Norway have been electric something that has now started to yield a growing supply of used batteries we are located in Norway because this is the most mature market for uh EV cars in Europe and we are ensuring that all these batteries are reycled so that the materials inside them can be reintroduced into a circular value chain and become new batteries again and again and again we can recover with today's technology up to 95% of the critical raw materials this will be an extremely important source of uh of materials to enable further electrification we are actually creating an above ground mine we are an alternative to traditional Mining and that enables also a closed loop in the local markets because we can establish where these batteries end their life and ensure that we have additional production of critical raw materials in that market so this will enable Europe to have its own mine in a way because we create an above ground mine uh in the Home Market where we produce critical uh raw materials to supply to to supply the the cell manufacturers with what they need to build new batteries the obvious reason uh to be excited about this industry is is the sales of EV cars and you know we have very good statistics for that and then you have some uncertainty related to the to the lifetime of the batteries but but uh these batteries will need to be recycled sooner or later uh so uh it's it's quite obvious that the market will come and then uh the question is who who will uh uh become the winners in this market as for who will be the biggest winners and perhaps the losers too in the global lithium Revolution that contest is now well underway and now we're on this fourth Industrial Revolution which is electrification and decarbonization and it's primarily going to be fueled by lithium in its use of battery storage it's going to unlock Renewables is going to enable us to decarbonize our transport link so it's key to to the future of mankind I think if any material is a candidate to be the oil of the 21st and 22nd century it's lithium lithium is overwhelmingly dominant in that electrochemical Arena and that electrochemical storage arena is going to be one of the cornerstones of the global industrial and technological landscape for the next 100 years not fore the transition to cleaner forms of energy is forcing businesses and investors to rethink their work from first principles and that is presenting a chance to build a new economic model that is not only lower in carbon emissions but truly better and fairer for communities and ecosystems all over the world the booming lithium industry is at the center of that struggle companies investors and governments in this space have some of the most exciting opportunities in the 21st century economy but those opportunities come with intense scrutiny heavy responsibility and some intimidating challenges this was the third film in a three-part series please make sure to like comment and subscribe for future ft films
2023-11-25 04:01
