Due to the huge market for new energy vehicles, the originally relatively inconspicuous lithium resources industry has also attracted everyone’s attention. The secondary market is lithium: the thematic market cap can also see the heat.
For purely electric vehicles, the cost of the traction battery is the largest part of the vehicle cost, accounting for about 40-50% of the vehicle cost. China has 400 million cars and if they were all replaced by electric cars, assuming each car consumes 60 KWH, China would need 24 TWh (= 24,000,000,000 Wh).
A 1GWh battery requires 2200-2500 tons of lithium iron phosphate cathode material, and each ton of lithium iron phosphate requires 0.25 tons of lithium carbonate, so the carbonate consumption of lithium per kWh per unit is 0.55- 0.62 kilograms, if we want to produce 24 TWh, we need 14.4 million tons of lithium carbonate.
In 2021, China’s lithium carbonate production was 298,200 tons (with a production capacity of about 500,000 tons), an increase of about 59.47%; Lithium hydroxide production of 190,300 t (approx. 260,000 t capacity), an increase of approximately 105% over last year. (10,000 tons) and lithium waste recycling (30,000 tons) is about 160,000 tons of lithium carbonate equivalent, and the external dependence on lithium raw materials is about 65%.
Here’s a simple estimate, maybe you have a better idea: a 2022 brand with a standard range of 550km and a 61.4kWh battery costs 210,000 yuan, it takes about 36.8kg of lithium carbonate. If the current price of nearly 600,000 yuan per ton is estimated, the cost of lithium carbonate in the stamp is 22,000 yuan.
That’s why lithium prices are getting a lot of attention. And why last year, when the new energy vehicle market is good, so will the market value of lithium miners.
Part 1, How does lithium affect battery prices?
• History
In previous developments, the falling cost of electric batteries has been the key to the spread of electric vehicles in China and around the world. The main way of electric battery cost reduction is:
- Develop Technology
- Expansion of scale
- Control material cost
From 2021 to the first half of 2022, it is precisely because of the rapid decline in electric battery costs for domestic manufacturers that China’s new energy vehicles are struggling to move from the policy support phase to the market phase of reduction of subsidies. Period. With the joint efforts of the upstream and downstream industry chains, the power battery system has achieved a low price in 2021.
• Transformation
The shift took place in 2022. Before that, the volume of power batteries in China continued to hit a new high. This high demand has also pushed up the prices of upstream resources. In addition, there are foreign drivers:
- On the one hand, both Europe and the United States are moving toward electric vehicles,
- On the other hand, Europe and the United States are also focusing on the security of local supply chains, locking in resources, and expanding local capacity.
Global domestic and foreign energy battery companies are expanding production at the same time, lithium batteries need to use lithium resources, demand increases, and prices increase.
• Future
Global lithium demand is around 600,000 LCE tons in 2021 (China alone consumes 29 tons of lithium carbonate and 19 tons of lithium hydroxide), which is expected to reach between 800,000 and 900,000 LCE tons in 2022 and further grow to 1.5 million LCE -tonnes in 2025. At this rate, lithium will become scarce in 2021, tightly balanced in 2022-2023, and become scarce again in 2024-2025.
Part 2, Where are the world’s lithium resources?
Because lithium resources have such a significant impact on the price of new energy vehicles, the next question is: where are the lithium resources in the world?
As the lightest metal in nature and the lowest standard electrode potential, lithium is a naturally occurring “battery metal” that exhibits a long-term rigidity of demand in high specific energy power batteries. The abundant lithium resources can support power and energy storage applications around the world. The world’s proven reserves of lithium (lithium carbonate) resources are approximately 374 million tons, 70% of which are stored in salt lakes. But projects combining large, high-grade, and easily minable lithium resources are few and unevenly distributed around the world.
Lithium ore can be divided into lithium for ore mining and lithium for salt lake mining.
• The extraction of lithium from ore
The extraction of lithium from ore has a long history and the technology is relatively mature. The main raw material is spodumene concentrate. The chemical composition of the raw material is stable, the process is easy to control and relatively easy to manufacture. high-purity lithium products. Among the world’s lithium mines, projects with excellent equipment and large resources are mainly concentrated in Australia, with Africa expected to be the next destination.
The Canadian government has ordered three Chinese companies to sell their stakes in key Canadian mining companies following a national security clearance. Therefore, many foreign mineral resources are not safe for us.
• Lithium from the salt lake
The salt lake is a comprehensive natural resource distributed all over the world, the salt lake contains many inorganic salts, organic matter, and organisms, it is a multi-layered sphere (hydrosphere, atmospheric sphere, biosphere, and lithosphere). long-term composition products, rich in various minerals, and salt content is more than 50 g/l.
The salt lake with mining value has the characteristics of large reserves, large areas, and high quality. The construction cycle of a salt lake is long and the process must vary with the lake and adapt to local conditions. The advantage lies in the low cost and large scale after completion.
The limitations of lithium in salt lakes are often not the resources themselves, but rather the impact of infrastructure (energy, logistics, environmental protection, teams) and economic changes (such as the volatile economic climate in South America).
At present, lithium extraction technology from salt lakes is progressing rapidly, whether it is ahead or behind: in 2020-2025, the total production capacity of the global salt lakes will increase from 260,000 tons to 640,000 tons, and production will increase from 190,000 tons to 530,000 LCE tons.
Part 3, China’s lithium potential
China’s efforts to develop new energy vehicles and lithium batteries also take into account the fact that China has abundant lithium resources, both lithium ore, and salt lake lithium.
• Lithium resources in China’s salt lakes
The salt lakes of China converge on the Qinghai-Tibet Plateau. The Qinghai Salt Lake has a high content of magnesium and lithium. A large-scale potash fertilizer production capacity has been established, and lithium production capacity is in the growth phase. Salt lakes in Tibet generally have higher lithium concentrations but have not yet been fully developed due to poor infrastructure, harsh high-altitude conditions, and strict environmental regulations.
We expect China’s salt lakes to become our national treasure.
• Mineral resources
Among the hard rock lithium deposits in China, high-grade lithium deposits are mainly distributed in Sichuan and Jiangxi.
High-grade spodumene reserves are abundant in the Gaba district of Garze, Sichuan Province (average grade is approximately 1.30% to 1.42%). However, since it is common in mining areas with harsh natural conditions (Jinchuan Malkang Mining Area and Kangding Daofu Mining Area), it isn’t easy to mine and use.
The Yichun area of Jiangxi province is the main production base for Lemica. Lemica resources in Yichun are mainly divided into two areas: Yifeng – Fengxin Mining Area and Xinfang Mining Area. The Yichun mine contains a large number of unexplored intervals and proven lithium oxide reserves are greater than 6 million tonnes of lithium carbonate equivalent. There is also great potential for additional storage in the future.
Words in the End
All of this being said, you can see that domestic resources are plentiful and have great potential which, if fully exploited, can meet our future EV demand. And we also have a major weapon: battery recycling technology, which I will focus on in the future, which could reduce China’s lithium demand by at least an order of magnitude.
