If you’ve followed global lithium prices over the past few years, you know what a wild ride it’s been. Chinese spot prices shot to record highs in 2022 and then came crashing back down by 2024 — with big consequences for batteries and EVs that depend on the mineral.
So what happened? And what could happen next, especially as EV sales have been slower than expected?
In this episode, Shayle talks to Ernest Scheyder, author of “The War Below: Lithium, Copper, and the Global Battle to Power Our Lives” and senior correspondent at Reuters. They walk through the basics of lithium production and the recent timeline of key events affecting the industry, covering topics like:
- Why more of the world’s lithium comes from hard rock spodumene than salt brines
- How lithium is not one commodity at one price, but actually a variety of forms of the mineral at different prices
- Lithium’s shift from a niche industry serving nuclear and pharmaceutical supply chains to a global force supplying the battery transition
- The current oversupply, driven by Chinese producers that operate at a loss, and the western companies that are trying to challenge them
- Chile’s efforts to nationalize its lithium industry and shift to direct lithium extraction, which has not worked at commercial scale
Recommended resources
- Simon & Schuster: The War Below: Lithium, Copper, and the Global Battle to Power Our Lives
- Latitude Media: Are things about to turn around for the U.S. battery sector?
- Catalyst: The EV market’s awkward teenage years
Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform, by visiting energyhub.com.
Catalyst is brought to you by Antenna Group, the global leader in integrated marketing, public relations, creative, and public affairs for energy and climate brands. If you’re a startup, investor, or enterprise that’s trying to make a name for yourself, Antenna Group’s team of industry insiders is ready to help tell your story and accelerate your growth engine. Learn more at antennagroup.com.
Transcript
Tag: Latitude Media: podcasts at the frontier of climate technology.
Shayle Kann: I’m Shayle Kann, and this is Catalyst.
Ernest Scheyder: Many of these companies we’re sort of focused on their small, relatively small patches. Now they are sort of on a global scale, supplying some of the largest manufacturers out there like Tesla, like Volkswagen, et cetera, all of whom are hungry for fresh supplies of lithium.
Shayle Kann: Coming up, brine, hard rock, carbonate, hydroxide, Smackover, we’re talking lithium.
I’m Shayle Kann. I invest in revolutionary climate technologies at Energy Impact Partners, welcome. So for some reason I’ve always loved commodity markets. I mean, they’re notoriously bad from a venture investment standpoint, of course, but just from an interest standpoint, I don’t know, I find them fascinating, and there are plenty that are relevant to climate, fortunately for me, obviously. There’s electricity, there’s steel, there’s copper, clearly oil and gas is super relevant as well. But to me, one of the most interesting is lithium.
It’s a much smaller market than any of the others I just mentioned, I should note, but the demand growth trajectory is also steeper, and it’s got all the makings of a super volatile commodity landscape. There are geopolitical things going on in South America, and in China there are new technologies potentially showing up. And then there’s a crazy commodity price cycle that we’ve seen play out in this market just over the past three or four years that has been kind of a whirlwind, and created a lot of whiplash for players up and down the value chain.
We’ve talked a lot about batteries and battery metals, even including lithium on this podcast before, but really we’ve done that in the context of the final lithium chemicals that go into the battery, and not so much in the lithium supply chain itself. So let’s fix that for this one. I brought on Ernest Scheyder, he’s the author of a book on the topic. His book was called The War Below: Lithium Copper in the Global Battle to Power Our Lives. It’s a good read, but this is also a good conversation. Here’s Ernest.
Ernest, welcome.
Ernest Scheyder: Hey, it’s great to be with you, Shayle.
Shayle Kann: All right, let’s talk lithium, starting with I guess, where we get it from. Can you talk to me about brine, talk to me about hard rock? Where do we get our lithium?
Ernest Scheyder: I thought you’d never ask. Boy, it’s great to talk about one of my favorite metals here. Lithium obviously extremely important for our global economy right now, and there’s a huge focus on where and how it’s produced. Right now there’s two main source rock, if you will, or sources as you say, brine or hard rock.
Brine typically is found in huge parts of Western South America. Brine is essentially salty water, and it is teeming with lithium, with calcium, with magnesium, depending on the deposit. And the main way that it’s produced right now is large evaporation ponds. So you might’ve seen photos from Northern Chile’s Atacama Desert, where you see these big huge acres, hundreds of acre size ponds that are each sort of different hues of blue. You got cyan and maybe some purple, et cetera, et cetera. That’s because there’s a chemical step taken to remove those different metals from that brine. And lithium, of course, being a main one that Chile produces there. So that’s sort of the main way that brine is produced right now.
There’s also a hard rock. Spodumene is typically the type of source rock that lithium can be found in, and this is very abundant in parts of Australia, parts of the eastern United States, excuse me, and parts of Africa. And that production process is more akin to what you would think of as traditional mining, where you’ve got large blasting, you’ve got large Caterpillar trucks, you’ve got large crushers and et cetera, et cetera. So it’s more what you would think of as the stereotypical mining operation. Right now those are the two main ways to produce lithium. Chile, as I mentioned, is the world’s one of the world’s largest lithium producers and the world’s largest brine producer. Australia is the world’s largest lithium producer because of its large spodumene or hard rock mines, but there’s huge competition across the world to find new ways or novel ways to produce it as well from other sources, including clay, and then including direct to lithium extraction.
Shayle Kann: Yeah. I want to come back to DLE and talk a little bit about clay, but as it stands today, what’s the breakdown? How much of world lithium production is brine versus hard rock?
Ernest Scheyder: I mean, right now there’s definitely more lithium production in the world from hard rock than there is from brine. That’s due to a host of factors, not the least of which is just speed. It’s faster to take this hard rock out of the ground, crush it, and then use chemical processing to make lithium than it is to evaporate lithium out of brine, a process that can take many, many, many months, and needs to be done in a place where it obviously doesn’t rain. So northern Chile and the Atacama Desert, one of the driest places in the world, it makes sense that companies like Albemarle and SQM are producing it there where there’s very little precipitation. They wouldn’t be able to do that in say, Germany or Arkansas or other places that have large brine deposits, but have lots of precipitation.
So the big trend definitely is for more hard rock out there. Now, that’s due to a host of factors. One of them is because it’s easier to make lithium hydroxide from spodumene-produced lithium than it is from brine. There’s an extra step needed if you were to take lithium from brine and then to turn it from lithium carbonate into lithium hydroxide.
Shayle Kann: That’s a good segue. I wanted to talk about lithium chemicals next, because that’s obviously the next step in the value chain. So you get your lithium either out of brine or out of hard rock, and then there’s basically two pathways, lithium carbonate, lithium hydroxide. Can you talk through what are the different use cases, I guess, for each of those two? What drives demand for one versus the other? And then maybe as you said, walk through which ones come from which path predominantly, the brine path or the hard rock path?
Ernest Scheyder: Yeah, I mean, I think the operative word you used there subconsciously was drive the demand too. I mean, different automakers have different needs depending on the type of battery they want to produce. So BMW for instance, likes lithium hydroxide because it’s basically a higher performing type of lithium. It can help extend a range for a battery. Granted, there are a lot of factors that go into a battery’s range, but hydroxide can be better, hydroxide’s better in certain weather conditions, so if you’re operating in cold climates, you might want hydroxide. It also tends to be more expensive because it has these higher performing characteristics. So if you’re making something that does not necessarily need to have high performing characteristics like a watch battery for instance, you might go with carbonate. Or sort of a basic device powered by a simple lithium ion battery you might go with carbonate.
So depending on the type of end product that you’re using, you’re going to use a different type of lithium there. And there’s also different qualities there. So battery-grade lithium tends to be more highly processed than a more simple version there. So I guess the point I’m trying to make here is not all lithium is created equal or processed equally. You do have, as you say, lithium carbonate and hydroxide, and then there can be different quality versions of carbonate in there. Carbonate, sort of being, I guess the most basic version of it. Think of it like flour, like you got your sort basic white flour, but then you could have rye flour or flour that doesn’t actually have flour in it can still be used for baking, etc, etc, etc. If you were to sort of use this baking analogy.
Shayle Kann: Yeah, my basic understanding, tell me where I’m going to get this wrong. So in the cost curve of current lithium production, the lowest cost resources tend, I think to be the brine. Some of the big brine resources in South America, the brine in Atacama, right? So that’s the lowest cost of production from an OpEx perspective, but it’s brine, and so it’s easy to make lithium carbonate. If you want to make lithium hydroxide there’s an extra processing step, so you pay a little bit extra to do that.
On the other hand, the higher-cost resources tend to be the hard rock resources mostly in Western Australia, but they have the benefit of going, you can go direct to lithium hydroxide basically, if you want to. And so they can afford to be a little bit more expensive on the cost curve, generally speaking, if there is sufficient demand for lithium hydroxide, which as you said tends to come more from battery makers who want to make high nickel cathode, long range type of EVs.
And so it’s not as simple as you might imagine the commodity market being because in a normal commodity market where the products are exactly the same, there’s just a cost curve and you just cut off the cost curve somewhere depending on what the current market price is. But here you’ve got this additional dynamic of two different intermediate products that come out of it, which I think perhaps helps to explain why it’s complex, who ramps up and shuts down at any given time. We’re going to talk more about what’s happened in lithium pricing over the past few years, which has been a wild ride, but one of the results of it has been, I’ve noticed what seems like non-obvious choices, unless you really understand this from some of the major players. In contrast to the oil market where it’s fairly straightforward, price drops below X dollars a barrel, Y player shuts off. So there’s that additional complexity there. The other complexity I guess I want to ask you about though is, who’s doing that refining? Who’s doing that processing, and how does that differ from different types of resources?
Ernest Scheyder: Well, two guesses Shayle, on who actually leads processing for most of these types of lithium? I’ll just jump in. It’s China.
Shayle Kann: You wanted me to actually guess China, yeah. Okay, it’s China.
Ernest Scheyder: Yeah, I mean China is the world’s largest processor for many of these types of lithium, so we were talking about Australia and Chile earlier in the conversation. I mean, much of that lithium is shipped to mainland China where it’s processed into a form that can be put into a cathode, which then goes into a battery, et cetera, et cetera, et cetera. And so that’s due to a host of reasons. One of the main reasons is that China is the world’s largest EV market. And of course that’s where we’ve seen a lot of the spike in demand in recent years. China’s a large manufacturer of other electronics as well. So it makes sense that companies like Albemarle, world’s largest lithium company, have many lithium processing facilities in mainland China. And so that’s sort of the current market dynamic there right now.
We have seen a lot of interest from other regions of the world, the US, the European Union, et cetera, to increase lithium processing. They’ve been experiencing various degrees of success or not success, depending on how you look at it. The market dynamics are now are pretty tough for lithium producers writ large. So the idea of spending a billion or $2 billion in a lithium processing facility does not necessarily engender warm fuzzy feelings in the investors of many of these companies, for obvious reasons.
Shayle Kann: In fact, I just saw, I think this week that we are recording, Galp, who’s a Portuguese energy company, was going to build a lithium refinery in Portugal, I believe, with Northvolt, which they just canceled.
Ernest Scheyder: Yeah, Northvolt obviously has other concerns on its plate as well right now. It’s a tough market, and maybe now is a time to get into pricing, I don’t know. But we definitely see, given the current pricing dynamics, that many Western lithium companies are having to curtail their expansion plans because Chinese-linked rivals are increasing production or not curtailing their own production. I.e they’re operating at a loss essentially, in a pretty transparent bid for market share. And so while we are seeing demand for lithium continue to rise, and we are seeing more people in the world buying electric vehicles, we are also seeing a supply glut of lithium out there of all types, including carbonate, including hydroxide, and so that obviously has a huge effect on the price.
And I should also make a little parenthetical here that there’s not just one price for lithium out there. There’s many, many, many different types of price. And so that actually leads to confusion. The average retail investor will probably look at the Chinese spot price for lithium carbonate and sort of see that as an indicator for the global price of lithium. But yes, you could say that given the China’s role in the global EV market, given China’s gargantuan demand for lithium, that that could be seen as a stand-in. We also know that there are many, many different types of contracts out there that many companies are beginning to use that don’t reflect that price. The CME in Chicago is beginning to actively trade. The LME in London has plans to trade lithium. We’ll see where these both go in the future, but that’s one point that I would make is that there are many different prices of lithium out there, they’re not one price does not fit all, unlike oil where Brent or WTI tend to be the two that folks look at when they think about the global price of oil.
Shayle Kann:
So point taken on, there’s no single price for lithium, but let’s talk about pricing because it has been a wild ride for the past few years there. I don’t know what benchmark you want to use to describe it, but what has happened to pricing? I mean, take me back maybe 5, 10 years, and then draw the history of lithium pricing.
Ernest Scheyder: Yeah, let’s remember Shayle, I mean lithium historically was a pretty niche industry. Let’s just say mid-20th century one of its main uses was in the atomic industry. That’s part of the reason why the US developed this huge lithium industry in the eastern part of the United States, in North Carolina. We’ve seen companies like Albemarle and Arcadium are the legacies of much of this lithium investment in that area.
But the primary use was around things like drugs because lithium has a mood-stabilizing effect on the human brain, or greases, or glasses… Or glass, I should say. So it wasn’t exactly sort of this mass needed type of mineral out there. And so that really changed as the lithium-ion battery was invented, as more and more devices were made portable, and so you started to see, especially the past decade as demand has spiked, that there’s been a huge hunt for it out there, and then of course an increase in the corresponding prices of the middle that’s out there. And so you see different players making different contracts.
And so whereas many of these companies we’re sort of focused on their small, relatively small patches, now they are sort of on a global scale supplying some of the largest manufacturers out there like Tesla, like Volkswagen, et cetera, all of whom are hungry for fresh supplies of lithium. And that has led to a lot of people wanted to get into this space. And of course with any commodity market, if demand is high and supply is low, the price typically tends to go up. But we’re starting to see a lot more supply come on the global market, even while demand is going up, we’re still starting to see supply in some cases outstrip demand, and so that has had a deleterious effect of course, on the price.
Shayle Kann: But what actually happened? So prices spiked like crazy in, I don’t remember the exact timing, 2021 or thereabouts-
Ernest Scheyder: Right around there, yeah.
Shayle Kann: And you saw lithium prices, right? They got up to what, like 80… I mean, okay, to your point, the price everybody quotes, which is the China spot price, up in the $80,000 range or something like that?
Ernest Scheyder: Something like that, yeah, that sounds familiar.
Shayle Kann: Right, and then crashed, and now they’re back way below that again. So there was this run up. What was actually happening there? Was it buyers? Was there a frenzy to lock up supply because there was a fear that there would be under supply, and it turns out that under supply was a mirage? Or was it there actually was under supply and then a bunch of new supply came online in the past couple of years? What caused such a spike and a crash, do we know?
Ernest Scheyder: Well, let’s remember the global context in which we were in 2021. I mean, we were in the first full year of a global pandemic. There was a lot of attention on the future economy where we as a planet were going to go not just for transportation, but just electronics in general. There was a lot of focus on the future in the United States.
The next year, the Inflation Reduction Act was signed. So this 2021, 2022, we saw a huge interest in just renewable technologies in general continue to grow. And I think that fueled a huge focus around junior miners, not just in the United States, but globally on new ways to produce lithium. So that led to a lot of strong interest in this space from retail investors, and so you started to see equity valuations surge that were out there. We also at that point started to see, we hadn’t yet seen a lot of supply come online.
So yes, there was a lot of hopeful potential that there was going to be huge demand for this metal moving forward. We saw a lot of predictions by a lot of consultants and analysts on where lithium demand is going. So that had a correlating effect on the price. And so of course we saw the price go up. Now we have seen some more supply, a lot more supply come online in the ensuing years. We’ve also had a huge geopolitical, I should say, realignment in the past few months, which has changed I think how people maybe tempered perhaps this really, really strong expectation that we’re going to see everything go electric. I think probably what’s going to end up happening is we’re going to have a bigger mix moving forward with a petroleum-based economy. And so I think tempered might be the right word here, that things have been a little more tempered than people had expected in 2021, 2022.
Shayle Kann: Let’s talk a little bit about, I mean you sort of alluded to this, but there are a few interesting elements of geopolitics that play into the lithium market. There’s a Chile thing, and we should talk about what happened with Chile and nationalization, and then there’s obviously a China thing. There are other countries that are relevant as well, but those two feel like the big geopolitical movers here. So let’s start with Chile because that one’s kind of interesting. As we’ve talked about, Chile’s the largest brine producer in the world, and the second-largest producer overall behind Australia. What happened in Chile a couple of years ago?
Ernest Scheyder: Yeah, I was actually in Santiago the night that President Gabriel Boric announced on national television that he was essentially going to take steps that would nationalize the country’s lithium industry. Now, the word nationalization obviously has a loaded connotation, especially in parts of Central and South America. But what he was saying is that the lithium and Chile belongs to the Chilean people, and that should be controlled by Chilean state-backed companies. And so we just actually saw, let me take a step back. There are two main companies right now that produce in Chile, Albemarle and SQM. They produce in the Atacama, which is this sort of massive salar, salar is a solid flat, and they’ve been there for decades. Albemarle’s contract goes until at least 2040 or 2042, right around there. SQM’s phases out in 2030, so they had a bigger interest in this announcement.
Actually, SQM has just made a deal with Codelco, the state mining company, to essentially partner on developing other salars in the country, as well as fold in its operations in the Atacama. And so that’s been closely watched by investors in AlbeMarle, of course, and others.
So the government essentially is saying, we want to develop more salars. We want to have a Chilean state-backed company partner with private entities in a minority role to produce lithium moving forward. And we want to go outside the Atacama, we want to go to other salars. So if you’re looking at the broad global lithium market, what does that essentially mean? It means that Chile wants to produce a lot more lithium, and they also want to do it with a novel technology known as direct to lithium extraction, which has never actually worked on a commercial scale, but there’s a lot of money being poured into it by researchers across the globe. DLE essentially wants to filter lithium from brine, sort of like how your household water softener would filter out heavy metals from your drinking water. Same concept, but lithium is a salt, and salt corrodes, so there’s a lot of complexity there.
Shayle Kann: Yeah, I want to come back to DLE in a minute, but just staying on the geopolitics for a second. I mean, what’s been interesting about that is, so you read the announcement a couple of years ago about Chile is going to nationalize its lithium market, and that feels super disruptive and it feels like it’s going to, I don’t know, shut off supply, or who knows what was going to happen to Albemarle and SQM as a result of that.
Really what they were saying is that for any lithium project, basically Codelco, the state-owned mining company, which is mostly a copper mining company until now, has to own a majority. But it seems like that’s kind of working out okay so far, right? Like Albemarle and SQM are negotiating deals with Codelco and they’re going to develop new resources. I mean, am I reading the tea leaves wrong? It seems like it hasn’t been super disruptive.
Ernest Scheyder: Well, let’s remember that Boric will not be running for re-election, and his plan actually needs to get its way through the legislators in Chile, it hasn’t yet, but he has sort of stated his preference there and his goal. And as I mentioned, we’ve seen SQM make a deal, and Albamarle’s deal goes until, as I said, the 2040s. So what could happen in the future, I think we’re going to have to watch and wait and see.
What we do know is that there’s a lot of other companies that want to get into these other salars out there, so just yesterday we saw Rio Tinto, one of the world’s largest mining companies, said that it’s very interested in jumping into Chile and partnering with Codelco there. Rio Tinto is also heavily invested in neighboring Argentina as well. So there’s definitely a lot of interest in what Chile’s potential is long-term, and these plans from President Boric have not necessarily scared away private investors.
Shayle Kann: So that’s the Chile component. Let’s talk about the China component. I think there’s two parts to this. There’s obviously the refining part. China is dominant in all battery metal refining, including lithium as we discussed. And so there’s been a push to build refining outside China, but as you said, it tends to be a little more expensive. And so as the prices crash, that’s been somewhat challenged. So I’m interested in how strong you think China’s stranglehold is on the refining side. And then the second bit is lithium production in the first place, because my understanding is China actually does want to ramp up lithium production, though it doesn’t have the resources that are quite as plum as what you see in Australia.
Ernest Scheyder: Yeah, I’ll take the second one first. So China has reserves of a type of source rock known as lepidolite. So we were mentioning spodumene earlier that… And Australia has a lot of this, lepidolite would be another source rock for lithium. Producing lithium from lepidolite can be a little more, see how we say environmentally questionable, and so many of these-
Shayle Kann: Taxing.
Ernest Scheyder: Yes. And so many of these facilities do tend to have some ESG-related concerns. The cost curve also tends to be a little bit higher, and it’s a little more opaque, the production data around what they’re doing. What is sort of clear is that China is increasing production domestically from lepidolite, and that is having an effect on, obviously global supplies. It also has some of its mining companies operating in parts of Africa where they are mining hard rock and increasing supply there as well. So that’s on the upstream or the extraction side.
On the refining side, we’ve seen many Western companies and Chinese companies just continue to increase their refining capability there. A year or two ago, Albemarle bought several more refining facilities inside mainland China to increase its processing there. And that was purely due to the huge just demand that is really taking shape across the whole country.
Shayle Kann: Have we seen, obviously the inflation reduction act in the United States, the way it was designed was sort of intended to try to move EV battery supply chains outside China as much as possible, into the US as much as possible. So there’s multiple components to this, and there’s parts of it that are, you get credit if you produce domestically, there’s other parts you get credit if you produce in-
Ernest Scheyder: It was more designed to increase it in the United States rather than sort of punish China. I would sort of draw that distinction.
Shayle Kann: That’s interesting, though that may change now depending on what happens in the new administration, I suppose.
Ernest Scheyder: Correct, yes.
Shayle Kann: Has it worked so far from what we could tell?
Ernest Scheyder: Well, so the legislation’s been out for a little more than two years, and we have seen anecdotal evidence where some Western miners are saying that yes, some manufacturers are beginning to come to them more for deals to source these raw materials. Graphite is a great example. We’re seeing some graphite miners in Quebec charge a premium for their graphite that’s produced in North America to battery makers. Graphite is the largest metal by volume in an EV battery. It typically goes into an anode, whereas lithium, which we’ve been talking about, goes into the cathode. And so right now China is the world’s largest producer of graphite as well. And so if you’ve got a North American source of graphite and you’ve got a manufacturer that wants that EV tax credit tied to the IRA, we have seen graphite miners strike deals that are actually at premiums. And that’s obviously huge for the graphite industry, not necessarily great for the EV industry, which already is razor-thin margins. So where will that go moving forward? I think we’re going to have to see where that goes.
With the IRA we’ve seen a lot of money and… With the IRA and related pieces of legislation, we’ve seen a lot of money be doled out to prospective US lithium projects. There’s two in Nevada that have gotten some recycling projects as well. Those projects are still in development. And so I think we’ll see when they actually come online, how the entire market supports them. What we have seen from the incoming Trump administration is a desire to look at ways for industry to stand on its own two feet. So I don’t know if we’re going to see a lot more grants or loans from the IRA to industry out there, but could we see more things like tariffs or other trade-related steps taken to try to maybe level the playing field as best they would try to do?
I don’t know. I mean, I think that would be an area to look at, but I mean, I think depending on how you look at the IRA, it has had a net benefit for some mining companies out there. I mean, one quick thing that I would say is that I think Republicans and Democrats look at the critical minerals issue with the same end goal in mind, but they sort of take two different paths to get there. Republicans tend to look at this issue from a national security lens. Democrats tend to try to look at it through a climate change lens.
So if your goal is to affect climate change in a positive way, then you less focused necessarily on where the critical minerals come from. But if your focus is on critical minerals through a national security lens and you want to make sure that the Pentagon or other government agencies have access to the critical minerals they need for the national defense, then you might approach it from a completely different lens, but you’re still ending up at the same spot.
Shayle Kann: Right. Okay, so let’s wrap up by talking a little bit more about novel technologies. I mean, you mentioned direct lithium extraction, that’s probably the main one. You described what it is, where are we in, there are lots of different versions of DLE, right?
Ernest Scheyder: Yes, yeah.
Shayle Kann: There’s dozens of companies and all sorts of different technical approaches. Where are we in the development of direct lithium extraction technology from a commercial standpoint?
Ernest Scheyder: So I started writing about DLE in my day job like five years ago, and I remember my editor at the time was very kind and indulged me and said, “Sure, you can write about this space.” And I said, “Trust me, this is going to be a big thing.” And where we are today is that, as you say, Shayle, there’s been a lot of huge interest in this space, most recently from Exxon Mobil, which has invested more than $100 million dollars to try to extract lithium from a part of Arizona… Excuse me, a part of Arkansas known as the Smackover. And this is a giant, essentially underground lake of brine that’s filled with bromine and lithium and other metals, and companies have been extracting bromine from there for decades. So Exxon’s plan essentially is, can we just stick another pipe in the ground and filter lithium out of that brine and then re-inject it back underground?
Now, Exxon’s got obviously a lot of scientists at its disposal, it’s got a huge R&D division. Exxon helped invent the lithium ion battery in the early 1980s, it obviously invests a lot in oil infrastructure and oil technology. So it feels like given that what it call subsurface geological expertise, that it should be able to crack this code. But there are many other companies trying to jump into this space as well. There’s a lot of startups, there’s a lot of government-backed scientists.
We were talking about Chile earlier. President Boric has said he wants to phase out these large evaporation ponds and essentially have Chile only used direct lithium extraction. We’ll see how that plan actually takes shape in the coming years. Koch Industries is a huge investor in this space, Equinor, Occidental Petroleum, so a lot of oil companies as well are beginning to see the potential here to use DLE. But it’s not, when we say DLE, we mean basically an umbrella of a lot of different technologies, as you were saying. So there’s gosh, at least four or five more prominent ones at the top of my head, and we’ll see who ends up going first.
But what I would say here, DLE is not a magic bullet. Just because somebody cracks the code somewhere does not necessarily mean that it’s going to work elsewhere, because each brine is different. When you think of a brine deposit, it can have a lot of lithium or it can have a little bit amount of lithium, it could have a lot of magnesium and calcium and a lot of lithium as well. And so different deposits across the world have different concentrations, and that concentration is important because the technology that you have, the DLE technology that you select has to be tweaked for each brine. So just because it works in Arkansas doesn’t mean it’s going to work in Chile, or Western China, or parts of Germany.
And so that I think has led to a lot of confusion, especially among retail investors just assume the first person to crack this code is going to be a billionaire with a house on the beach. That’s not necessarily going to happen because each DLE is going to have to be personalized. And there’s also some huge concerns around water. I mean, DLE requires a lot of water, mining in general requires a lot of water. So how do you encourage more water recycling? Should different jurisdictions have different rules for that? For instance, in Utah, we’ve seen the state legislature, pretty conservative state legislature, enact a rule last year that essentially blocked development of DLE on the Great Salt Lake. The great Salt Lake is drying up. And so the state legislature is saying, “This is a huge tourist draw. This is a major impact on our state economy. The last thing we want is to take another step that could further its evaporation.”
And so we saw a company actually pull out, a DLE company pull out of Utah and close its whole lithium division because of steps that the Utah legislature there took. So how will that affect the DLE implementation moving forward? I think we’re going to have to closely look at the regulatory front. Texas for instance, has no rules right now governing lithium extraction, which I think people just assume because Texas has a huge history in oil and gas extraction, that it would also have these lithium rules, but they haven’t developed them yet. So the regulatory front.
Shayle Kann: And there’s some interesting resource in Texas in the form of oil and gas waste water.
Ernest Scheyder: Yes.
Shayle Kann: Right?
Ernest Scheyder: Yes.
Shayle Kann: There’s some folks trying to go after that, which is an interesting, we haven’t talked about that as a source.
Ernest Scheyder: It’s smaller potatoes, certainly than what it’s like in Chile or in Arkansas. I mean, the term is PPM, parts per million. I mean, in some cases in this produced water or this wastewater that goes alongside oil and gas extraction, we’re talking about in the 10 to 100 parts per million. In Chile, you could be 1,000 or higher. And so what does that mean in principle? That means you’ve got to filter a lot more volume in order to get the same amount of lithium, and so that increases your cost.
On the flip side, if you are already extracting that and it’s already a cost center for you because you’re paying to dispose of that wastewater, why not make it a profit center and try to get as much value out of that as you can? So that’s sort of the philosophical question that’s going on in the oil industry right now, and can DLE help make a buck from that?
Shayle Kann: All right, Ernest, we’ve walked through a whirlwind tour of the world of lithium. I guess final question for you, is there anything we should be looking out for over the next year or two years? Major developments that would, I don’t know, shake the foundation of the lithium market structure?
Ernest Scheyder: Well, I think this is an industry that is, I would say mining writ large historically has been a very politically conservative industry. And what’s very intriguing for me is that at least in the United States, we’ve seen a lot of miners grow increasingly reliant on industrial policy out of Washington. We talked about the IRA and other pieces of legislation, and what’s going on with the geopolitics, with Chinese-linked miners flooding global markets with cheap supplies of lithium, and nickel, and cobalt, and other critical minerals. I think increasingly what Washington does or doesn’t do is going to have a huge effect on this industry in a way that the oil industry or the natural gas industry is not necessarily affected by industrial policy. So that’s going to be a huge, huge area for everyone to focus on, and I think especially after January 20th, we’re going to have a lot more answers.
Shayle Kann: All right, Ernest, thank you so much for the time.
Ernest Scheyder: Hey, great to be with you Shayle.
Shayle Kann: Ernest Scheyder is the author of “The War Below: Lithium, Copper and the Global Battle to Power Our Lives.” He’s also a senior correspondent at Reuters. This show is a production of Latitude Media. You can head over to Latitudemedia.com for links to today’s topics. Latitude is supported by Prelude Ventures. Prelude backs visionaries accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at Preludeventures.com. This episode was produced by Daniel Woldorff. Mixing by Roy Campanella and Sean Marquand, theme song by Sean Marquand. Stephen Lacey is our executive editor. I’m Shayle Kann, and this is Catalyst.
