Global energy companies across the world have started a desperate bidding war for one of the world’s rarest earth minerals, driving the average price for lithium carbonate per tonne from 53,571 yuan ($8434.27) in January 2021 to an unprecedented 327,500 yuan ($51,561.93) in early 2022.
(Source: Trading Economics)
Lithium is an essential component of many of today’s advancing technologies, including vital MedTech, rechargeable mobile phones - of which 1.5 billion smartphones are sold each year, electric battery-operated vehicles- and even nuclear energy (source: Cell Phone Deal). Hundreds of industries are already vying to have possession of this increasingly precious resource - influencing prices and changing the commodities market forever.
As history begins to repeat itself, we can expect more private companies to look to benefit from lithium, encouraging illegal trade, stockpiling, and price monopolies. To this end, the future of rare earth minerals seems poised on the edge. Energy companies need to be smart; anticipating changes in the market and budgeting accordingly. Product buyers will become an essential part of global trade, as each company tries to attain resources at the best rate in a competitive market.
Why is lithium so popular?
Alongside its use in healthcare, technology and energy industries, lithium has become a shiny new solution for business sustainability and meeting climate change targets. Consumer habits inside and outside of the commodities market are changing, and 55% of Americans believe “it's important for companies to take a stand on key social, environmental, and political issues” (source: HBS). If corporations can demonstrate they are thinking and acting ethically, such as running net carbon zero offices, they are more likely to be looked favourably upon and chosen above the competition.
Similarly, citizens across the world are becoming conscious about their own living habits. Solar panel sales are increasing 33% year-on-year (source CNBC), and people are preferring to pick up energy-efficient LEDs over the alternatives. Lithium’s use in many ethical technologies allows corporations and individuals alike to “do their bit” in slowing worldwide global warming.
(Source: Green Car Congress)
The consequences of lithium demand
The fight for lithium may have devastating consequences on more than the livelihoods of a few businesses that can’t obtain the commodity - it could devastate entire ecosystems, economies, and tentative political alliances. In 2021, China began holding reserves of 1,500,000 MT lithium, mostly sourced from its trade agreement with Australia. However, “increasing lithium extraction domestic production may bring an end to this alliance” (source: Investing News).
(Source: Visual Capitalist)
As we’ve seen in the past, countries will be prepared to declare war in order to secure vital commodities (such as oil and natural gas) - much like the Second Boer War in Africa over gold and diamond mines, which resulted in the death of nearly 100,000 people (source: Earth Magazine). With continuing developments in nuclear weapons, a new world war could put billions of lives at risk.
Sooner or later, mining lithium - and competing for it - will have devastating consequences in 2022 and beyond.
The advantages and disadvantages of the “lithium rush”
Social impacts of lithium
Lithium has already transformed society as we know it, enabling portable devices like laptops and mobile phones to enter the market. This has increased communication channels for work and social life, allowing people to stay in contact around the world. On the other hand, increasing pressure on demand is slowing the advancement of these sustainable technologies, making green solutions inaccessible for many. Without the discovery of cheaper alternatives, quality of life differences between the wealthy and the impoverished will grow even further (through no fault of the commodities market).
Economic impacts of lithium
According to an NNRDA report updated in 2020, lithium mining companies generate roughly $1,222,994 in total economic activity per year for the local area. This comes from job opportunities, lithium sales, and even local investment into infrastructure, mining equipment, and safety gear. The consequences of the “lithium rush” can be attributed to business reliance on a steadily declining commodity sold at astronomical prices. Thousands of livelihoods could be at risk if companies are unable to secure lithium for product creation.
Environmental impacts of lithium
Most renewable energies wouldn’t be possible without lithium, and neither would clean and low-carbon transport options like electric cars offered by most car makers. Despite great sustainable results, lithium is not a renewable resource itself. PV Magazine predicts that we could run out of lithium by 2040, and mining the material is incredibly harsh on the environment (source: BBC). Currently, the majority of lithium including those present in car batteries is not recycled, adding to waste produced by fashion trends to keep up with latest technologies. This needs to change along with improved energy storage in order to secure the future of earth’s natural resources.
Political impacts of lithium
Many countries are already facing uncertainty accessing commodities, and manufacturing industries took a hit in the pandemic when supply chains were affected by COVID-19. The tension this placed on trade deals and agreements, between the US and China in particular, could very well be a cycle that starts repeating itself as more suppliers are simply unable to meet international demand.
(Source: Visual Capitalist)
How should affected companies react?
While more lithium can’t suddenly be produced and demand outstrips supply (source: Financial Times), there are some actions energy companies can undertake on a day-by-day basis to increase their chance at survival:
Recycle lithium - many R&D teams could benefit from recycling lithium that is wasted in product development.
Invest in alternatives - lithium is a resource that has been around since 1817, but there are suitable alternatives arising in the market, including sodium, magnesium, and seawater in batteries (source: New Scientist). Commodity companies would be well advised to ensure their own future by investing heavily in providing suitable alternatives to their B2B clients.
Recruit extensively - hiring new employees can feel like a massive risk for companies facing supply issues, but attracting talent in product development, research, and buying can help businesses create innovative risk mitigation strategies, and front the charge for our new, post lithium, market.
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