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Explained: What is lithium and why its imminent shortage will slow down EVs

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It’s not just the world's limited lithium resources that will hit the world’s move towards an electric future, but the dearth of refineries and lithium-ion producers -- 'Li' being a key component in batteries that power everything from phones to EVs.

Explained: What is lithium and why its imminent shortage will slow down EVs
Silvery white and the least dense, lithium is the lightest metal and lightest solid element. This metal, mostly found in compound states, is essential for lithium batteries as well as lithium-ion batteries. The metallic compound is the key part of modern batteries that power electronics from smartphones to laptops, to electric vehicles (EVs)It is for this reason that the price of lithium has reached record highs.
The price of 99.5 percent lithium carbonate has reached 227,500 yuan (over Rs 27 lakh) per tonne, an increase of over 450 percent over the past year. The prices are only expected to increase as the lithium sector is expected to face shortages starting 2022, and continue well into the end of the decade.


What is the lithium shortage all about?
Lithium and lithium-ion batteries are not experiencing any major shortages right now. But that is quickly set to change. Multiple analysts and experts have pointed out that as the demand for more battery electric vehicles (BEVs) grows, the metal’s price is expected to skyrocket. The manufacturers of electric vehicles will pass on the costs to customers, thus slowing down the essential phase-out of fossil fuel-based internal combustion engine (ICE) vehicles.
“The rising price of lithium demonstrates what many in the industry have warned about for some time: The growing divergence between supply and demand for lithium. Ultimately, this will lead to an increase in the price of EVs, as automakers pass the cost on to the consumer,” Daniel Clarke, thematic analyst at GlobalData, told Forbes.


The world currently produces over 80,000 tonnes of lithium annually, and identified reserves stand at nearly 80 million tonnes, of which the major deposits are in Argentina, Australia and Chile. Bolivia also has the biggest deposits of lithium, at an estimated 21 million tonnes, and almost none of it has been mined.
It is not just the shortage of lithium that will hurt companies, but a dearth of refineries and lithium-ion producers are going to have an impact. Currently, China is the dominant player, which controls 80 percent of the global lithium refining capacity, according to BloombergNEF.
But the shortage of lithium can have other far-reaching consequences as most of the plans to see push the world towards net-zero carbon emissions require vast quantities of lithium, that are far beyond the current refining and productions capacities.


“They (the leaders) are ignoring the trillion-ton elephant in the room. Carbon-free power and gasoline-free transportation cannot exist without mining an absurd amount of lithium. Right now, production is not even close to keeping up. We simply aren’t pulling enough lithium out of the ground to match the projected demand,” US investment newsletter Energy & Capital’s Luke Sweeney told Forbes.
What are automakers doing?
Companies are already investing in improving the global supply chain of lithium. They are investing in better storage, more efficient processing, larger processing capacity, transportation systems and recycling capabilities. Several other companies are also exploring other forms of decarbonisation for their vehicles.
Hydrogen remains one of the most viable options as an alternative fuel to be used in ICE vehicles, which will be completely free of emissions. Some companies are also starting to focus on plug-in electric vehicles (PEV) to reduce the dependence on lithium. Experts state that even hybrid vehicles would be better than completely fossil fuel-based vehicles on the road.
Research into other battery compounds that may replace lithium and other lithium compounds that can be used instead of lithium-ion is already on.


 
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