Lithium's Long Term AdvantageLithium’s Long Term Competitive Advantage
By Dave Brown – Exclusive to Lithium Investing News
With neighboring states aggressively competing for resources and formally announcing plans to increase stockpiles of lithium and rare earth minerals, China has been creating shortages of rare earth minerals prompting the US and European governmentsto develop strategies for the secure supply of the metals needed forhigh tech and military applications. Recently, government officials inthe UK and Europe held hearings over the strategic importance of rareearths. Trying to develop strategies for securing supplies of the metalshas proven a difficult challenge.
The South Korean government aims to boost supplies of the tworesources from Korean-owned mines up to 10 percent of annualrequirements this year from 5.5 percent last year. Korea plans toincrease stockpiles of about 30 minor metals including lithium and rareearths, to the equivalent of 13.5 days of consumption this year from 8.1days last year. The country is planning to build a facility in thesecond half of this year to store strategic metals such as lithium, witha capacity of 35 days of consumption.
These developments have caused some observers to suggest several Japanese companies are setting a trend in developing motors without rare earths components for use in the global automotive industry.
Toyota Motor Corp (NYSE:TM) andTesla (NASDAQ:TSLA)are in the advanced stages of creating a hybrid induction motor thatdoes not utilize rare earth and Toyota has reportedly announced plans tocompletely phase out rare earth metals from its electric and hybridvehicles. Additionally, the Japanese automotive giant also reportedlyhas intentions of developing a new magnesium-sulfur battery to replacethe current standard of lithium-ion batteries, and is aiming to replacelithium within 10 years.
Broader economic context
In an interview with Lithium Investing News, Head of Global Research and lithium specialist at Byron Capital MarketsJon Hykawy indicated that the question is not one of absolutefeasibility; the question is one of economics and performance, “how muchmore might it cost you to avoid lithium and REEs, and how much poorerperformance will the resulting vehicle have.”
Nissan Motor Co (TYO:7201) (PINK:NSANY)has publicly disclosed that the current battery in a new Leaf coststhem about $18,000 to make, and contains 4 kg of lithium metal, or about$120 worth of battery-grade lithium at current prices. This makes thecost of the lithium attributable for less than 1 percent of the totalbattery production expenses.
Toyota said that they are investigating the use of AC inductionmotors to replace the current permanent rare earth magnet-equipped DCmotors they use in vehicles like the Prius. As Dr. Hykawy indicates,“the Prius contains about 2.2 kg of rare earth magnets, but a lot ofthat is in ‘vital’ parts like the motors that move your seat back andforth, or that make the windows roll up and down. But even assuming allof this is necessary, that 2.2 kg of magnet contains about 700 grams ofneodymium, and the rest is cheap iron and boron. At today’s inflatedprices outside China, 700 grams of neodymium metal is worth about $100(inside China, where almost all of the neodymium metal is actuallybought and sold, it is $45).”
It appears difficult to create any business case to eliminate lithiumand rare earth based upon current market prices. The competitiveadvantage of lithium appears to be quite secure for energy storage in anautomobile, and the system around a rare earth element equipped DCmotor is as light and efficient as it gets. Substituting anything elsewill translate into marginally poorer performance in the hands of theconsumer.
Implications on the lithium industry
Currently, the fundamental lithium supply and demand dynamics arestrongly influenced by consumer electronics, as there is effectivelyzero use of large lithium ion batteries in cars. Dr. Hykawy suggested,“if that same [Toyota] battery substitute were to scale down to use inconsumer electronics, then the impact could be large, since more than 25percent of current global lithium demand is due to battery use.”
Proceed with caution
Highlighting some of the drawbacks of potential alternatives, “Themagnesium-sulfur batteries mentioned by several sources as an area ofresearch have a few problems associated with them. The obvious one issafety…but the other unpublicized one is that, at present, thesebatteries don’t have good cycle life, that is, they can only be chargedand discharged a very limited number of times before they die. Thelifetime issue might be solved with lots of additional work, but thesafety issue will never completely go away, especially as much saferlithium batteries make gains in performance.”