Lithium: What Role Does Tesla Play In The Demand For This Precious Metal?

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Lithium is a soft silver and white alkali element and metal found primarily in the earth’s crust and the oceans.

On this page we cover the main uses of lithium, top lithium producing countries, the world’s largest lithium reserves, and why it’s important to various industries and the global economy.

It is not found freely in nature, but in a compound form with other minerals usually in igneous rock or in brine pools.

Lithium has physical properties that make it different from other metals. It is the lightest chemical element and the lightest metal.

It is so soft it can be cut with a knife, and so low in density that it can float on water.

What Is Unique About Lithium?

These unique properties make lithium and its compounds capable of energy density – the ability to pack a lot of power into a very small space. As a result, lithium has become an extremely important component of batteries for laptops, phones, and other digital devices.

Furthermore, its potential for use in other devices such as electric cars may be enormous. As a result, lithium is a very important global commodity that has experienced explosive growth in its demand.

Lithium’s discovery traces back to the 19th century when Swedish chemist Johan August Arfwedson identified the element in the mineral petalite. To this day, petalite remains an important source of lithium. Lithium is also found in igneous rocks such as granite pegmatite and in oceans and salt lakes.

Main Uses of Lithium

Lithium has a range of uses in many different industries. Its uses vary by location and end-use markets, but in general the following industries comprise the bulk of lithium demand worldwide:

UseExamplePercentage of whole market usage
Batteriese.g. smartphone battery39%
Ceramic and glasse.g. fire viewing windows for fireplaces30%
Lithium soape.g. lubricating grease 8%
Lithium polymere.g. lesser known type of lithium battery5%
Air treatmente.g. air conditioner3%
Miscellaneouse.g. antidepressants10%
Chart to show supply and demand of lithium
Chart to show supply and demand of lithium. Source: Deutsche Bank

Why is Lithium Important?

The explosive growth in demand for lithium and the resulting rise in its price is almost entirely a function of its fast-growing adoption in batteries.

Lithium batteries are used in an increasing number of products in different industries across the globe. By 2020, analysts expect batteries to account for more than 55% of lithium demand.

Tesla Model S
Electric cars like the Tesla Model S use half of the World’s lithium-ion battery supply

Shift to Electric Cars

Although less than 1% of automobiles run on electricity, these vehicles use half of the world’s lithium-ion battery supply.

The size of the electric automotive market is expected to increase more than thirtyfold by 2030. As this market grows, its market share of lithium-ion battery use will almost certainly grow as well.

“We would basically need to absorb the entire world’s lithium-ion production.”

Elon Musk – explaining the challenge Tesla faces to hit their production target of 500,000 vehicles per year

The catalyst for this rapid adoption has been the incredible efficiencies achieved in lithium battery production. Lithium-ion batteries cost about $3,000 per kilowatt-hour (kWh) to produce when they were first introduced commercially in the mid-1990s.

This figure has plunged to $190 per kWh and is expected to approach $100 per kWh in the years ahead. To put this in perspective, $240 per kWh equates to about $3 a gallon gasoline while $150 per kWh equates to a gas price of $2 per gallon. These improvements are certain to hasten the move toward electric vehicles and away from fossil fuels.

Chart to show cost decreases of lithium ion battery packs and the corresponding uplift in annual demand
Data from Bloomberg New Energy FInance. Image via Visual Capitalist

Electric Consumption

Off-grid systems such as the Tesla Powerwall and other do-it-yourself imitators absorb an increasingly large supply of the world’s lithium production.

Tesla Residential Powerwall
Illustration showing residential installation of Tesla Powerwall. Image Source: Tesla

These systems allow consumers to store electricity from their electric grid or from solar panels in lithium-ion batteries. These energy-efficient homemade power grids are expected to grow in popularity as consumers seek cleaner sources of energy.

Large scale battery systems also have the potential to solve problems in areas around the globe that suffer from regular power cuts and energy shortages. For example, South Australia as a region frequently experiences powercuts as a result of storms and spikes in demand due to heatwaves.

Elon Musk, founder of Tesla, offered to solve this and install the World’s largest battery system. If that wasn’t a big enough challenge he even agreed to have it up and running in 100 days or he wouldn’t charge the Australian Government for it.

Elon Musk agrees to complete battery system in 100 days
Elon Musk agrees to the challenge on Twitter

Smartphone Demand

Before the automotive industry and off-grid systems began consuming a large percentage of the global supply of lithium, the smartphone and electronics industry consumed the lionshare of lithium each year.

Lithium battery demand was surging at a rate of more than 20% annually. Consumption has grown by high double-digits in recent years and has outstripped supply, which has grown at a slower rate.

Demand for lithium-ion batteries should continue to grow as smart home devices including thermometers, smoke detectors and alarms increase in popularity

Supply Shortages

Research suggest suppliers will struggle to keep up with lithium demand over the coming years.

Aerial shot of Tesla Gigafactory
Aerial shot of Tesla Gigafactory via YouTube

Giant lithium-ion mega-factories such as the Tesla Gigafactory could help bring economies of scale to the production of batteries, but the pipeline of lithium needed to make these batteries could be subject to supply chain issues.

As demand for lithium continues to soar, world producers will have to harvest the mineral from new sources to keep up with demand. For example, scientists at Stanford University have been exploring how to extract lithium deposits from supervolcanoes in the US.

Not everyone agrees there will be a shortage of lithium. According to Deutsche Bank estimates, there are 185 years’ worth of reserves in the ground and leading mining companies plan to add 20 lithium production sites to the 16 currently operating.

“There are a lot of projects out there, and they’ll end up oversupplying the market.”

Mark Cutifani, CEO of Anglo American

Lithium Production: Who Produces It and Stores It?

map showing World's biggest lithium producers

Worldwide lithium production has been steadily growing in response to its demand for battery applications and is estimated to be about 35,000 tons annually.

Top Lithium Producing Countries

RankFlagCountryAnnual Production (tons)

However, some lithium mining remains secretive due to the highly competitive nature of the industry and the relative scarcity of the commodity.

In the United States, for example, a brine operation in Nevada produces lithium, and two companies produce downstream lithium compounds from domestic and imported lithium carbonate, lithium chloride, and lithium hydroxide.

However, these companies do not release production data, so US production numbers are unknown.

Which Countries Have The Most Lithium?

Lithium resources are growing worldwide as geologists discover new continental brines, geothermal brines, hectorite, oilfield brines, and pegmatite. Estimates place current global reserves at c.40 million tons.

RankFlagCountryReserves (tons)
#8Flag of CanadaCanada2,000,000
#9Democratic Republic of Congo1,000,000

Why Doesn’t Bolivia Produce Much Lithium?

You may have noticed that Bolivia ranks high in terms of lithium reserves but doesn’t even appear on the list of top lithium producing countries. This is in short because Bolivia is a poor country and is only really just finding its feet in terms of lithium production.

Bolivia’s president Evo Morales has committed to investing $995 million in the development of the lithium industry between now and 2019

7 Alternatives to Lithium-Ion Batteries

The main reason the price of lithium has skyrocketed is because of the surge in demand for lithium-ion batteries; used in smartphones, electric cars and homes.

Here are alternatives that just might beat lithium-ion to the punch as the power source of the future.

AlternativeWhy it might replace lithium-ionFurther Reading
Hydrogen Fuel CellsProduction of hydrogen is more
Lithium-sulphurLighter than lithium-ion giving this rechargeable battery a higher energy density.Wikipedia
Graphene supercapacitorsAble to hold hundreds of times the amount of electrical charge potentially suitable as a replacement for electrochemical batteries such as lithium-ion and lithium-sulphurGraphenea
Redox flow batteriesNearly limitless longevity dues because there are no solid-to-solid phase transitionsEnergy Storage Association
Aluminum-graphite batteriesQuick to recharge - as little as 60 secondsExtreme Tech
Bioelectrochemical batteries or "Bacterial Batteries"Perfect for use in remote, dangerous and resource-limited areas.TechCrunch

Further Reading

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