Australia mines about 53 percent of the world's supply of lithium, and virtually all of it is sold to China. But now the Australian government wants to break the world's dependence on China for processing the minerals driving the green revolution.
Australia is already the world's largest producer of spodumene—the base material for lithium hydroxide and lithium carbonate—and has the second largest lithium ore reserves globally.
Out of the 26 million tons of global lithium reserves as per the U.S. Geological Survey published in January 2023, Chile was home to the largest lithium reserves base with 9.3 million tons of proven lithium reserves. Australia was ranked #2 based on the lithium reserves with a reserve base of nearly 6.2 million tons.
China has over half of the world's lithium refining capacity but has to rely on imports for about two-thirds of the raw material. According to the U.S. Geological Survey, China accounts for 8 percent of the world's lithium reserves, which are mostly held in an igneous rock called spodumene.
Tesla officially broke ground Monday on a Texas lithium refinery, making it the only U.S. automaker to refine its own lithium. CEO Elon Musk said the refinery will produce enough battery-grade lithium for 1 million electric vehicles by 2025, which would make Tesla the largest processor of lithium in North America.
Most Australian lithium is produced from hard-rock spodumene, in contrast to other major producers like Argentina, Chile and China, which produce it mainly from salt lakes.
Australia, meanwhile, is a more ancient geology. Lithium-bearing pegmatite deposits are found across the county, in chunks of landmass that collided over hundreds of millennia to form the continent of Australia.
Pilbara Minerals Limited ($PLS)
Australia's biggest lithium miner, Pilbara Minerals owns the Pilgangoora Project in Western Australia, which has an estimated mine life of 26 years and a maximum production capacity of 580,000 tonnes per annum.
Chile holds the world's largest lithium reserves and is the world's second-largest producer. Lithium is currently produced from hard rock or brine mines. Australia is the world's biggest supplier, with production from hard rock mines. Argentina, Chile and China mainly produce it from salt lakes.
The process of extracting lithium consumes significant amounts of water and energy, and lithium mining can pollute the air and water with chemicals and heavy metals. In addition, mining lithium can disrupt wildlife habitats and cause soil erosion, leading to long-term ecological damage.
Kovyktinskoye is the largest gas field in Eastern Russia. Lithium is contained in the associated brines, and there has been talk about its extraction for several years. The process accelerated in 2022, and Kovyktinskoye was put into production in late December 2022.
Australia mines about 53 percent of the world's supply of lithium, and virtually all of it is sold to China.
Australia has plentiful supplies of natural resources, including the second largest accessible reserves of iron ore in the world, the fifth largest reserves of coal and significant gas resources. For a long time, commodities have made up a sizeable share of our exports.
Tianqi Lithium Energy Australia Pty Ltd
TLEA owns a majority stake in Greenbushes, one of the world's largest lithium mines located in Western Australia, and also operates a battery grade lithium hydroxide refinery in the state.
Lithium extraction has adverse impacts on the environment, like any other mineral that we mine for. However, similar to coal and gas, lithium mining can result in soil degradation, water shortages, biodiversity loss, damage to ecosystem functions, air contamination and, overtime, an increase in global warming.
Australia's Magnis Energy will supply Tesla with important lithium-ion battery materials for at least three years.
Are lithium shares a good investment? While lithium share prices can be volatile due to supply-demand issues that impact the value of lithium as a commodity, the lithium sector does have good long-term growth prospects as the demand for lithium-ion batteries in electric vehicles (EVs) continues to increase.
Nearly 80 per cent of known deposits are in four countries – the South American lithium triangle of Argentina, Bolivia and Chile, and Australia.
Most Australian lithium is exported to China, accounting for over 85% of total value in each month of 2021 and over 94% in each month of 2022 (year to date).
The sulfate lithium resources are mainly distributed in the Chaidamu Basin and the north of Tibet. The quality of Tibet Salt Lake in China is higher than that in Qinghai, with the remarkable characteristic of the high content of lithium resources and low Mg/Li value of brine5.
The supply crunch won't hit immediately. Even though the price of lithium has surged more than tenfold over the past two years, there's enough capacity to meet anticipated demand until around 2025—and potentially through 2030 if enough recycling operations come online. After that, chronic shortages are expected.
The Chinese government ended its subsidy for households buying new EVs, which has seen demand drop sharply in the country. Combine it with ramped-up battery production throughout 2022 leaving a surplus in inventory, we're seeing a short-term plunge in lithium prices.
To benefit from the growth potential in this industry, some of the best lithium stocks to buy include Tesla, Inc. (NASDAQ:TSLA), Rio Tinto Group (NYSE:RIO), and Albemarle Corporation (NYSE:ALB).