China’s Lithium Supply Bubble Bursts as “Made in America” Lithium Prospects Grow

“China-based battery manufacturers continue to look abroad for supply as domestic reserves and available projects are inadequate to meet demand,” reports Benchmark Mineral Intelligence (BMI), forecasting a global supply deficit for lithium by 2025 with continued elevated prices. 

While China produces its own home-grown lithium, its project pipeline is limited, and it faces environmental scrutiny due to its egregious mining practices. China’s production of critical minerals from raw materials has come at a high cost to the environment, with its output subject to standards less exacting than what we demand in the West. 

“A soft and subtle hissing noise, the quiet whisper from the needle piercing China’s lithium end user supply bubble, has battery manufacturers on alert,” says Graham Harris, Chairman and Director of Surge Battery Metals Inc. (TSX.V:NILI), a pure-play lithium company focused on its flagship project Nevada North Lithium Project in Elko County. “A global supply deficit for lithium has even China, the undisputed energy metal processing leader, frantically hunting for lithium to address domestic supply deficits.” 

China controls about 60% of the global capacity for processing raw lithium products into battery-grade chemicals but is dependent on South America and Australia to supply high-quality lithium carbonate for China’s refining. China’s domestic lithium resources are poor-quality, with low lithium-ion concentration and elevated levels of impurities, leaving a formidable gap between supply and demand. 

What’s holding back China’s supply of lithium? “‘Conscious decoupling’ – reminiscent of Gwenyth Paltrow’s separation from Chris Martin, has taken root with Western nations and manufacturers steadfastly decoupling from China,” says Harris, who was previously Founder, Chair, and Director of Millennial Lithium Corp., which was acquired by Lithium Americas for $490M. “This significant geopolitical awakening has resulted in manufacturers on ‘red’ alert about dependency on lithium supply chains emanating from China.”

When President Biden signed the Inflation Reduction Act (IRA) into law in August 2022, clean energy leaders recognized that this was the largest federal investment in alternative energy and sustainability in American history allocating $10 billion to support the construction of clean energy tech factories and retrofitting existing factories to make clean energy equipment and components. President Biden’s Bipartisan Infrastructure Law includes $6 billion in incentives to support R&D and production of batteries in the US, as well as supporting the creation of a domestic supply chain.

Amid the transition to more renewable sources of energy, Nevada Gov. Joe Lombardo’s economic development office’s five-year strategic plan focuses on expanding the state’s electric vehicle production, technological innovation, and new infrastructure to make the “Silver State” the epicenter of lithium mining in North America. 

America’s road to energy metal independence is long and full of hurdles, both on the supply and processing side. While the United States holds about 8 million metric tons of lithium in reserve, ranking it among the top five countries in the world, right now, only a fraction of the world’s supply is produced at one solitary lithium brine mine in Nevada called Silver Peak, run by Albemarle Corp. 

As the United States steps up its efforts to process lithium into battery-grade chemicals that can be transformed into lithium-ion batteries used to power electric vehicles and to store wind and solar energy, domestic processing plants are still rare in North America, with China controlling most of the battery supply chain including the processing of all key minerals including lithium, cobalt, and nickel, as well as the batteries themselves.

However, with U.S. President Biden’s pledge to “outcompete China” to “make these technologies” in the “United States” – not having to import them, encouraging signs of progress are occurring. Albemarle announced a $1.3B infusion in a “Mega-Flex” lithium processing facility in South Carolina to “process diverse lithium feedstock, including lithium from recycled batteries annually and expects to produce approximately 50,000 metric tons of battery-grade lithium hydroxide from multiple sources, with the potential to expand up to 100,000 metric tons.”

With claystone exploration representing an entirely new means of extracting lithium from vast untapped claystone-hosted supplies in the U.S., the Lithium Americas, and pioneer deals – as well as the State of Nevada and the U.S. Dept of Energy’s financial commitment – clearly demonstrate the viability of lithium-bearing clays as a lithium source. 

With the heightened need for the U.S. to source as much sustainable, “home-made” lithium as quickly as possible, Nevada is poised to play the starring role in the country’s lithium mining boom. Nevada’s natural resources and supportive policies to bring new mines online ensure its place in history as the leader in America’s secure and sustainable new energy paradigm.