Lithium Producers Optimistic About US Inflation Reduction Act, but Supply Challenges Remain

Challenges ahead for lithium supply and companies

As demand for lithium continues to increase globally, whether supply will be able to keep pace is still to be seen. Albemarle is forecasting that lithium demand will reach 3.7 million metric tons by 2030, with supply of lithium carbonate equivalent only hitting 3.2 million metric tons ― including recycling.

“Market tightness is here to stay for a long time. In the last 12 months, all projects have experienced delays for a variety of reasons,” said Christian Barbier of Allkem (ASX:AKE,OTC Pink:OROCF).

He added that price volatility, supply chain issues and expertise are just a few of the problems.

Allkem, which is expected to merge with Livent later this year, owns assets in Argentina, Canada and Australia.

“The main challenge is that the majority of spodumene at this point is going to China to be converted,” Barbier said. “We need conversion capacity to be built outside of China.”

Another factor to consider is that a lot of projects in the US are greenfield assets. “These are not projects that are generating cash,” Maryssael said. “They need funding, and participation across the market is really critical.”

For Maryssael, who is Livent's chief strategy officer, skills are also key. “What China has done in terms of building refining capacity in the last few years really speaks to their industrial capacity and a lot of chemical engineering know-how.”

She explained that it is one thing to get lithium out of the ground and another thing to get it into a battery cell.

“Getting consistent commercial-scale, battery-grade material and qualification into the supply chain is going to be one of the biggest challenges the industry faces,” she said.

Partnerships are key for successful lithium production

Partnerships have been key in the sector for many years when it comes to successfully developing lithium projects.

“Partnering is a real necessity for the evolution of this industry,” Henderson said. “Lithium is very challenging, so you really need the strengths of partners to help solve the technical challenges and help forge these supply chains.”

Funding can be a clear benefit of partnerships, but joining forces with the right partner can have other advantages.

“I think there are a lot of non-financial (benefits) to these partnerships that are difficult to quantify, whether that’s unlocking doors in governments, whether that is looking for support on permitting — I think there’s many ways in which these partnerships are critical to the success of any project,” Maryssael said.

Another factor for companies to consider when looking at who to partner with is sustainability.

“This direction cannot be changed,” said Yasmin Liu of Tianqi Lithium (OTC Pink:TQLCF,SZSE:002466), which has assets in Australia, Chile and China. “When we sign an offtake agreement or long-term contract, there are very strict environmental, social and governance standards in those contracts.”