Experts discussed lithium supply chain risks at Fastmarkets’ Lithium Supply & Markets event. Read on to learn what they had to say.
The lithium industry has been talking for some time now about the importance of building resilient supply chains, with COVID-19 further exposing the risks of the current dynamics.
China dominates the midstream chemical-refining space, with over 80 percent of production. But most lithium mining takes place in Australia and in countries in South America, like Argentina and Chile.
Speaking during a panel discussion at this year’s Lithium Supply & Markets event from Fastmarkets, Maria Ines Ulla, former undersecretary of mines in Catamarca, Argentina, shared a South American perspective on lithium supply chains.
“A lot of times people say, ‘We have the lithium, we should do the battery’ ― there’s lack of information, or maybe there’s no local comprehension, about the entire supply chain and what it means. Policymakers need to understand what the complexity of the situation means,” she said.
“There’s a window of opportunity for countries to develop the resources.”
Ulla also highlighted worries around sustainability from a community perspective, explaining that in Catamarca, brines are located in remote places.
“We cannot talk about sustainability without talking about development ― we need a much wider point of view,” she explained. “I’m saying that there are communities that need to be developed and need to get out of poverty, and also how, from the lithium industry, can we add value to these communities and develop these remote regions?”
Ulla added that it’s important to see this relationship as a triangle: the government, communities and the industry need to work together.
For Chris Berry of House Mountain Partners, environmental, social and governance (ESG) issues have really changed in the industry in the last four years.
“You cannot speak to a company in this space, either a producer or a developer, that doesn’t have a pretty sound or at least a very elaborate and detailed ESG strategy, because I think these assets, regardless of where they are — they’re not going to get developed unless there’s a much clearer focus on how they’re developed,” he said.
“And a lot of that has to do with the processing technology, but also making sure that the individuals involved get a fair shake, and get a fair chance to take part in this entire sort of revolution.”
Looking over to the US, conversations around critical minerals and supply chains have been going on for some time, but for Joe Bryan, principal at Muswell Orange, it seems many stakeholders haven’t come to an understanding on the pace of the changes associated with the electrification of transportation.
“Neither politicians nor policymakers have come to grips with the scale and scope of change we have going on here, and to the reality that it’s going to happen regardless of what they do,” he said.
Bryan added, “Setting aside maybe someone like Senator Lisa Murkowski, who has really been talking about this for a couple of years.” Murkowski is the chairman of the Energy and Natural Resources Committee for the US Senate. She introduced the American Minerals Supply Act in May of last year; it provides a framework for a sustainable domestic mineral supply chain.
Berry said it does make sense to decouple and regionalize supply chains — but to a point.
“Decoupling and regionalizing the supply chains makes an awful lot of sense, certainly from perhaps a national security perspective, but maybe not necessarily from an economic perspective, because I think when you regionalize and you deglobalize, ultimately what happens is there’s cost creep, and your costs are going to increase rather than decrease,” he noted.
Berry emphasized there’s no easy fix. “It’s an economic decision more than anything else … the model I think that emerges in terms of the supply chains that are developed are going to look different going forward than they were in 2016. (I would argue) there’s going to be a lot more … equal or even sharing of the explicit costs, and also the environmental costs as well,” he added.
DCDB Group Managing Partner Emily Hersh, who hosted the panel on supply chain vulnerability, said it is notorious how everyone, regardless of where they are in the world, loves to talk about lithium supply chains to get some attention.
“But from a policymaker side … when it comes to rolling up their sleeves and actually doing work to make it happen, they realize very quickly (that) it’s incredibly complicated, incredibly difficult,” she said.
When asked about China’s influence in South America, Ulla talked about how agreements with China have evolved through the years. However, in Argentina, there’s more negative sentiment towards the US than to Chinese investments.
“There’s this negative sentiment driven by past history in Argentina with the US, and that sentiment, it’s deep and it’s really complicated when it comes to politics,” she said.
However, she sees potential in the private sector. “The private companies are the ones that are rolling up their sleeves and trying to create the assets and to certify the reserves and to get investment into their projects with all of the challenges that are in the upstream side of getting right-quality lithium chemicals with different types of brines, etc.,” said Ulla.
“I hope there are policies towards (investments) to get the foreign investment that is needed to get things going in Argentina at all levels — not only in the lithium industry, but in general.”
For Bryan, this highlights the challenge the US has not only in the lithium market, but in every market. He believes the country needs to understand the context within which it’s trying to enter discussions.
“It also identifies the demand for us to engage globally with allies, adversaries, competitors, everyone,” he added. “We have a lot of work to do not just internally to the US and driving investment here, which I think there will be an effort, but globally, resetting the table.”
Bryan also shared his thoughts on the upcoming US election, saying what happens that day will matter.
“I do think there’s a fundamental difference, a fundamentally different energy policy that would come out of each of the (Donald) Trump and (Joe) Biden administrations. I think that’s going to make a big difference in this market domestically, and also in the US and its position globally,” he said.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.