top positions in the production of lithium<\/a> brines for decades.<\/p>\nWhile the lithium industry in Argentina remains open to the market with typical royalties and local permitting required to be met, the Chilean government has restricted the development of lithium assets in Chile. SQM and Albemarle in Chile produce lithium independently, under licences assigned by the Chilean government. Chile now intends to take majority ownership of lithium production in the country.<\/p>\n
Nationalisation of lithium production is nothing new to the industry, with Bolivia developing lithium resources through state-owned Yacimientos de Litio Bolivianos (YLB) and Mexico passing a law in April 2022 declaring all lithium deposits in the country to be state-owned and managed by LitioMex. The scale of Chilean production, however, makes Chile\u2019s move more significant, with Chile accounting for roughly 30% of global refined lithium production in 2022.<\/p>\n
As a major supplier of lithium compounds to the European, Chinese, Japanese and North American markets, governmental control could see future lithium supply chain agreements influenced by geopolitical pressures and relationships, particularly if supply availability enters a significant deficit.<\/p>\n
OEMs becoming involved in upstream markets<\/h3>\n Ensuring long-term access to critical raw materials has now risen to the highest levels of government chambers and industry board rooms, supported by projections of looming shortages by market analysts.<\/p>\n
The direct involvement of automotive manufacturers in lithium projects, such as General Motors\u2019 investment in Lithium Americas and Stellantis\u2019 investment in Vulcan Energy, combined with manufacturers like Tesla becoming directly involved in lithium refining, all point toward the closer relationship OEMs have to take with their raw material supply chains.<\/p>\n
Offtake agreements signed between lithium producers and downstream industry participants such as battery manufacturers and automotive OEMs have become commonplace, a far cry from the stand-off approach most automotive manufacturers displayed before 2020.<\/p>\n\u00a9 shutterstock\/Guille C<\/figcaption><\/figure>\nThe number and volumes of offtake agreements have also increased significantly since 2020, with the offtake agreement between Ford Motors and Albemarle signed in mid-2023 equating to over 100kt lithium hydroxide (88.0kt LCE) over a five-year period.<\/p>\n
Larger offtake agreements, equity purchases and construction of processing capacity are expected to become increasingly common over the coming decade as manufacturers scramble to access raw materials. In addition to the direct necessity by downstream purchasers to secure materials, offtakes are equally important for new project development and reducing risk for potential financial investors, ensuring the continued development of new lithium projects globally.<\/p>\n
Government-supported reshoring of capacity<\/h3>\n While the automotive and Li-ion battery markets are global entities, the lithium supply chain feeding these industries has become increasingly polarised due to government legislation in key regions. Government subsidies for EVs have long been a part of fuelling the growth in lithium demand from automotive applications.<\/p>\n
Though more recently, the announcement of the Inflation Reduction Act (IRA) in the USA and the Critical Raw Materials Act\/Green Deal in the EU have looked to entice Li-ion manufacturers and their raw material supply chains to build capacity within their respective regions or within \u2018allied nations\u2019.<\/p>\n\u00a9 shutterstock\/Andreanicolini<\/figcaption><\/figure>\nThe IRA and Critical Raw Materials Act\/Green Deal are both clearly targeted at reducing supply chain dependence on the Chinese market for various raw materials and downstream Li-ion components, creating divergent markets for IRA\/Green Deal-compliant materials and materials which will be consumed by the currently dominant Asian market.<\/p>\n
Since its announcement in mid-2022, the IRA has seen a flood of investment into the US battery and battery raw material industries, including lithium. In addition, countries and governing bodies such as the EU, Canada, Australia and the UK have been ensuring they comply with IRA rules, effectively opening up their domestic raw material and battery component industries to the growing US market.<\/p>\n
The incentives laid out in the IRA will continue to see the build-out of a robust US-based battery and EV manufacturing industry. However, the USA will remain reliant upon lithium imports to meet the required demand volumes until 2030. The European Union\u2019s Critical Raw Materials Act\/Green Deal is expected to have a lesser impact than the IRA as there is no direct tax credit made available for reshoring capacity. OEMs will likely take steps to maintain access to the European market via minimum domestic sourcing and recycling commitments.<\/p>\n
Future lithium supply chain outlook<\/h3>\n Overall, global lithium supply chain dynamics remain in flux, with increasing regionalisation of consuming markets being met with an increasingly geographically diverse supply of lithium mineral concentrates and refined lithium products.<\/p>\n
Supply chain integration is expected to continue at new lithium mineral operations, requiring third-party lithium processors to build diverse upstream feedstock sources to mitigate supply availability risks. Production in certain jurisdictions will increasingly target particular markets to access financial benefits or gain premiums based on environmental criteria.<\/p>\n
With lithium supply forecast to become increasingly tight towards the end of the decade, however, geopolitical pressure on ensuring supply from key trade partners will likely become fiercer, which will only be amplified by greater state involvement in the lithium supply chain.<\/p>\n
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Current dynamics of the international lithium supply chain<\/title>\n \n \n \n \n \n \n \n \n \n \n \n \n \n\t \n\t \n\t \n \n \n \n \n \n\t \n\t \n\t \n