The need for governments, communities and lithium industry participants to have a clear focus on how mining assets and the regions in which they operate are developed is crucial for sustainable lithium production, panelists told delegates at Fastmarkets’ virtual Lithium Supply & Markets conference on Tuesday October 27.
Argentina, alongside Chile and Bolivia, is part of the so-called “lithium triangle”, which holds more than half of the world’s reserves of lithium. Argentina accounted for nearly 9% of global lithium production in 2019, according to Fastmarkets’ battery raw materials research team.
“We can’t talk about sustainability without talking about development,” Ulla told delegates.
“We need a much wider point of view,” she added. “The community needs to get development and needs to get out of poverty. So how, from the lithium industry, can we add value to those communities and develop those regions?”
Ulla also emphasized that a collaborative effort between government agencies, local communities and lithium industry participants is needed to achieve this goal.
Chris Berry, the founder of consultancy House Mountain Partners, agreed with Ulla and pointed out that the industry might have overlooked the challenge of finding a way to balance environmental, social and governance (ESG) issues when the outlook for lithium demand started to improve about four years ago against a backdrop of anticipated wide and quick adoption of electric vehicles (EVs) globally.
The optimism back then and decent profits attracted significant interest from exploration companies to invest in the battery mineral.
Fastmarkets’ assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot range exw domestic China reached a peak of 170,000-180,000 yuan ($25,360-26,851) per tonne during the fourth quarter of 2017, the highest level since Fastmarkets launched the price assessment in October of that same year.
The price has since trended lower after market participants realized that the electrification of personal transportation would take longer than initially expected, while previous enthusiasm for exploring and developing lithium resources had resulted in an oversupplied market. The price stood at 39,000-41,000 yuan per tonne on October 22, down by 77.1% from the 2017 peak.
But a sound ESG strategy is critical in today’s conversation on mining asset development, Berry said.
Regionalization versus globalization
Panelists acknowledged the world is facing greater attempts to regionalize mineral resources, including lithium. But the outcome of this regionalization might not be presented in the way some participants envisioned.
“Decoupling and regionalization of the supply chain makes a lot of sense from a national security perspective, maybe not necessarily from an economic perspective,” according to Berry, who added that regionalization and de-globalization will inevitably result in increased costs.
He also pointed out that the decoupling of the supply chain might not work well especially at present given the increased economic challenges the world is facing amid the fallout surrounding the Covid-19 pandemic.
“There is a need to understand properly what the supply chain for lithium-ion batteries is,” Ulla said.
“You have the wheat, but you don’t necessarily need to make the cake,” she added, citing one of DCDBC Group managing partner Emily Hersh’s papers.
Berry added that although globalization has its challenges amid lingering trade tensions between China and the United States, it is not dead. Instead, globalization will be embraced after it undergoes certain changes.
Opportunity from Covid-19
The global pandemic has obviously had a significant impact on the global economy and related negativities could persist, according to all panelists who agreed there would not be an end to the pandemic until a vaccine is available.
But the pandemic is also creating some opportunities since it will reset everything in the industry and reset the opportunity for growth, according to Berry.
Countries, such as the US, at some point will require more stimulus and there will be a great amount of liquidity out there to reconfigure the supply chain and to invest in the technologies, he said.
Joe Bryan, principal at Muswell Orange LLC, agreed with Berry and pointed out that while some other countries have stepped up to prepare for the trend of electrification of personal transportation, the US should use this time to think about how to strategically invest in the lithium industry. Bryan said he believes the industry will inevitably grow and support the country’s geopolitical position and domestic employment in the future.