We are diging more into new ideas, will Lithium become a White Gold? Everybody is using oil now, will Li become next commodity to build upon energy security and sustainability? With Technology it is very difficult to make your stake: who will win consumers hearts? Do you remember names of any of more then 3000 automobile companies in USA at the turn of the 20th century, apart from Ford F? Oil is still here. Could Lithium become the Obama's choice for energy revolution? We do not know how to build the batteries, which technology will win, who will survive from the Big Three if any, but we can dig into Lithium story as commodity. Who is producing it, who owns deposits and who is exploring for it. From the first glance playfield is very small and just few names in the game so far.
Nothing grows in the heart of the Salar de Atacama. this ancient Chilean lake bed 700 miles north of Santiago may be the driest place on Earth, a wasteland strewed with salt-encrusted rocks that resemble cow pies. Annual rainfall on the salar (which in Spanish means "salt lake") rarely tops a few millimeters. The cloudless skies combine with the high altitude, 1.4 miles above sea level, to produce punishing solar radiation, capable of frying exposed flesh in minutes.
Humans would steer clear of the Salar de Atacama were it not for the precious brine that bubbles 130 feet below its surface. When first pumped from the ground, the brine looks like slushy, dirt-stained snow, of the sort that piles up on Manhattan sidewalks after a spring flurry. But when left to broil beneath the desert sun, the water in the brine slowly evaporates, leaving behind a yellowy mineral bath that could easily be mistaken for olive oil.
This greasy solution yields the substance that makes modern life possible: lithium. The lightest of all metals, lithium is the key ingredient in the rechargeable batteries that keep cell phones and laptops humming. Chile is the Saudi Arabia of lithium. According to the U.S. Geological Survey, this single ancient lake bed contains 27% of the world's reserve base of the metal.
Until recently lithium was a minor commodity, used in small quantities by manufacturers of glass, grease and mood-stabilizing drugs. But demand has skyrocketed in recent years, as BlackBerrys and iPods have become middle-class staples. Between 2003 and 2007 the battery industry doubled its consumption of lithium carbonate, the most common ingredient used in lithium-based products.
The lithium bonanza may just be starting. Lithium-ion batteries are integral to the automobile industry's plans to wean itself off fossil fuels. The hotly anticipated Chevrolet Volt, a plug-in hybrid car slated to debut in 2010, will use a lithium-ion battery alongside a 1.4-liter gas engine. Mercedes plans to roll out a hybrid version of its S-Class sedan in 2009 and will similarly rely on lithium-ion technology to produce superior mileage. Nissan is working with NEC to mass-produce lithium-ion batteries for hybrids, in hopes of churning out 65,000 per year by 2010.
Since a vehicle battery requires a hundred times as much lithium carbonate as its laptop equivalent, the green-car revolution could make lithium one of the planet's most strategic commodities. The rush is on to find and develop new sources of it, a race that has mining companies scouring the globe's remotest corners, from the high-altitude deserts of Chile and Bolivia to the wilds of northern Tibet. The prospectors seem undeterred by the possibility that lithium's automotive heyday could be cut short by the cost and complexity of lithium-ion batteries. They prefer instead to focus on optimistic forecasts. Kevin McCarthy, a commodity chemicals analyst at Bank of America, sees the potential for double-digit annual sales growth for lithium carbonate at least through 2012.
Such rosy short-term predictions have investors swooning over Sociedad Química y Minera de Chile S.A., or SQM, the Chilean fertilizer and mining company that produces nearly a third of the world's lithium carbonate and whose leather-skinned employees brave the Salar de Atacama for the sake of gadget lovers. In the past three years the Big Board-traded shares of SQM have climbed from $11 to $22. In the first six months of 2008 SQM reported a profit of $191 million, up 103% from a year earlier, on sales of $787 million, up 41%.
SQM is controlled by Julio Ponce Lerou, who heads Pampa Calichera, a Chilean investment group; he is also the ex-son-in-law of Augusto Pinochet, Chile's military dictator for 17 years. But Potash Corp. of Saskatchewan has coveted SQM since at least 2002, and it now owns 32%, roughly the same amount as Ponce Lerou and the maximum allowable under SQM's bylaws. Ponce Lerou controls SQM via a deal he struck with Kowa, a Japanese firm that owns 2% of SQM's shares. But he has also had to take on a huge amount of debt to increase his stake in Pampa Calichera, which Standard & Poor's placed on negative credit watch in July. That turmoil might open the door for Potash, which briefly seized control of SQM in 2005.
The lithium craze explains only a portion of Potash's interest in taking over SQM. The Chilean company gets 58% of its revenue from fertilizers, compared to 11% from lithium. But it's clear that investors are intrigued by SQM's rapidly expanding operations in the Atacama desert. Chile boasts at least ten more salars that have yet to be explored for lithium reserves. If GM is right and drivers are willing to pay a steep premium for lithium-powered cars, SQM could be poised for a windfall.
But the lithium industry is still young, even embryonic. China, which produces 23% of the world's lithium carbonate but most of it at a far higher cost than Chile does, recently started extracting brine cheaply from a Tibetan salar. This operation has already had an impact. When SQM's lithium revenue fell 10% in the first quarter of 2008, the company blamed "the growing presence of Chinese producers."
SQM's lithium fields are ringed by blindingly white knolls of magnesium chloride, a salty substance that looks suitable for skiing. These magnesium hills, the by-products of a neighboring potassium chloride plant, provide an excellent vantage point from which to view the rectangular lithium ponds that stretch out toward the dull-brown Andes. From atop the tallest of these snowy mounds, one can see dozens of rectangular man-made ponds, each one bigger than a hockey rink.
The plastic-lined ponds, arranged in neat grids, are filled with brine in various states of evaporation. Ponds awash in the freshest brine are tinged a brilliant turquoise; others, nearly ready for harvest, are richly yellow around the edges. Scarcely any human intervention is needed; the sun does all the work. After the brine reaches a lithium concentration of 6%, which takes not quite a year, it is pumped into tanker trucks and driven three hours west to a plant near the Chilean coast. There the solution is purified and dried until all that remains are crystals of lithium carbonate. These crystals are then granulated into the finished product coveted by battery manufacturers, a fine white powder resembling cocaine.
The solar energy keeps SQM's costs to an estimated $1,260 per ton of lithium carbonate. It sells that ton for up to $12,000.
Lithium production wasn't always this simple, or this cheap. For almost half a century, starting in the early 1950s, the world's primary source of lithium was North Carolina, much of it from a mine in the town of Kings Mountain. The soft metal, vital to the military's H-bomb program, was laboriously extracted from spodumene, a silicate mineral occasionally used as a gemstone. By the mid-1970s the U.S. was producing about 2,900 tons of lithium per year.
Around that same time an Exxon chemist named M. Stanley Whittingham was working on a novel rechargeable battery, one that volleyed lithium ions between anode and cathode. Whittingham's design took advantage of the fact that lithium stores an unusually large amount of energy for its volume, making it ideal for portable electronics. Though Exxon failed to commercialize the technology, probably because it couldn't easily eliminate the risk of fires, the engineering world realized that lithium might someday go places.
Foote Mineral, which owned the Kings Mountain mine, hoped to get the jump on the lithium boom by expanding to northern Chile, where desert brines were rumored to contain vast, cheaply obtainable amounts. In 1975 Foote signed an agreement with the Chilean government, then run by Pinochet, to explore the Salar de Atacama. Nine years later Foote began extracting lithium from a sliver of the lake bed. (The Foote subsidiary that worked the salar is now owned by Rockwood Holdings of Princeton, N.J., which continues to produce lithium on the tract.)
Newly wise to the desolate salar's value, Pinochet's government decided to auction off the rest of the region's mining rights. The American firm Amax (now part of Freeport-McMoran) won the bidding but didn't develop the property. In 1992 Amax sold its rights to a former arm of the Chilean government that had recently been privatized and handed over to Pinochet's then son-in-law, Julio Ponce Lerou.
Lithium's boom had begun in earnest just a year before, when Sony launched its first generation of lithium-ion batteries for consumer electronics. By the end of 1991 Sony was making 100,000 a month. SQM began selling lithium carbonate in late 1996, and within a matter of weeks, lithium carbonate prices fell by a third, to $2,000 a ton. The American lithium industry vanished overnight.
Sidebar:White Gold
Prices didn't fully recover until 2002, as cell phones and laptops became affordable for millions of consumers. Since then prices have climbed steadily upward, especially for so-called battery-grade lithium carbonate, a powder with the finest particles and fewest impurities. Glass and ceramics makers pay $6,000 to $7,500 a ton for relatively chunky grades of lithium carbonate. Demand for the good stuff has been growing 20% to 25% a year. There's no telling what will happen if and when lithium car batteries catch on.
Today's hybrid cars have batteries in which nickel is the operative metal. Why might lithium displace it? Simply because it weighs less. A lithium-ion battery stores two to three times as much energy per pound as a nickel-metal hydride battery, says Charles Gassenheimer, chief executive of Ener1, a New York firm that purchased Delphi Corp.'s lithium-ion battery business. (Lithium-ion batteries are very different from lithium batteries, which are not rechargeable and are used in things like hearing aids.)
General Motors' long-awaited Chevrolet Volt, a compact car priced at around $40,000, will feature a 400-pound lithium-ion battery pack capable of holding 16 kilowatt-hours of energy. That's 21 horsepower-hours. Doesn't sound like much, but supposedly the Volt will be able to go 40 miles on battery power before needing a recharge from its small gas engine. With a full charge from a wall outlet, the car will go 100 miles for every gallon of gasoline burned. (At least if the driver behaves; read Lisa Margonelli's "The Plug-In Paradox")
Other sickly automakers are focusing on purely electric vehicles. In September Chrysler announced that it was developing an electric Dodge capable of traveling 150 miles on a charge. Tesla Motors recently began selling its $109,000 all-electric Roadster, which contains a battery studded with 6,831 lithium-ion cells.
The U.S. Advanced Battery Consortium, a research organization funded by Detroit's Big Three, opines that lithium-ion batteries will need to hold 40kwh of energy before electric-only vehicles are ready for mass commercialization. There is considerable debate as to how much lithium carbonate is required per kwh in a lithium-ion battery, but 3.1 pounds is one common estimate that's in line with calculations from Argonne National Laboratory. If you use that rule of thumb, a mass-market electric car will require 124 pounds of lithium carbonate.
Only 102,000 tons of lithium carbonate were produced in 2007, and only about a quarter went into batteries of any kind. SQM forecasts that global production will rise to 176,000 tons by 2018, 10% of which will be for automobiles, enough for 284,000 electric-only vehicles. That doesn't even account for demand from future hybrids using lithium batteries. The Freedonia Group, a market research firm, has forecast that worldwide hybrid sales will hit 4.5 million vehicles in 2013. There's quite a gap here.
William Tahil, the founder of Meridian International Research, a technology consultancy in Martainville, France, has argued that there simply isn't enough economically recoverable lithium on the planet to support the auto industry's ambitious plans. Tahil estimated that only 4.4 million tons of the world's lithium resources can be extracted without prohibitive cost, a supply he believes will be quickly exhausted if lithium-ion batteries become a staple of next-generation cars.
Tahil reserves particular skepticism for SQM. The company states that it has already discovered 5.7 million tons of lithium in the Salar de Atacama and that only 45% of its lake-bed claim has been explored. But Tahil, who is not a geologist, scoffs at that assessment; he believes that the brine starts to run out below 130 feet under the salar.
"You have a mother lode, where [the brine] is excellent quality, and every time you put the pick in you come out with a nugget. But the further out from the mother lode, you have to start panning. It takes more work." By Tahil's estimate the Chileans may have already exhausted half of the salar's mother lode.
Tahil's controversial "peak lithium" argument has been vigorously disputed by metal suppliers and automakers. Argonne National Laboratory has stated that although "significant market penetration by [electric vehicles] with Li-ion batteries would perturb the market and require expansion of imports or U.S. production … long-term supply should not be a major concern."
R. Keith Evans, a geologist who has worked in the lithium business since the 1970s, has been Tahil's most vehement critic. In a rebuttal to Tahil published in March, Evans pegged global reserves of lithium carbonate at 165 million tons. He also argued that if demand spikes as anticipated, higher prices will make it cost-effective to extract lithium from clay and wastewater.
"Well, geez, it's only the 33rd most abundant element in the world," says Ener1's Gassenheimer. "We're quite certain the world will not run out of lithium."
Toyota is less sanguine. According to published reports Toyota originally planned to use a lithium-ion battery in its 2009 Prius, but decided to stick with nickel-metal hydride (the company denies ever fully committing to lithium-ion). "The future supply of lithium will not be able to sustain both the exponential growth in batteries for consumer electronics and a large automotive battery demand," says Jaycie Chitwood, environmental strategy manager for Toyota's advanced technology group.
Toyota is also skeptical over lithium-ion technology's long-term viability. Bill N. Reinert, national manager for Toyota's advanced technology group, predicts that lithium-ion batteries will be in vogue for only about a decade, after which the auto industry will switch to a lighter, more affordable solution--perhaps fuel cells or an as yet untested battery chemistry. "If people want an electric vehicle that goes 200 miles but doesn't cost $100,000, that's not lithium, that's something else," says Reinert.
"Lithium-ion batteries are still not usable from our perspective," Honda President Takeo Fukui told Automotive News last March. The 2010 Honda Insight, another much-anticipated hybrid, will sport a traditional nickel-metal hydride battery.
The thirst for lithium carbonate will continue to send miners to inhospitable locales. FMC, the corporate descendant of Foote Mineral, mines lithium at the ominously named Salar de Hombre Muerto in Argentina's mountainous northwest. Rincon Lithium, a subsidiary being sold off by Admiralty Resources, is set to step up production in the nearby Salar del Rincón.
The continent's most tempting prize is the Salar de Uyuni, in the southwestern corner of Bolivia. The lake bed is said to contain even more lithium than Atacama. In September an investment company controlled by French industrialist Vincent Bolloré announced plans to mine lithium in Bolivia; that lithium would be used to produce the so-called BlueCar, an electric vehicle that Bolloré is developing with the Italian design firm Pininfarina. But the brine beneath the Salar de Uyuni is tainted with a lot of magnesium and will be expensive to purify.
SQM has a permit to extract enough lithium to produce 66,000 tons of lithium carbonate per year but can always apply for permission to go beyond that figure. "Chile's government at the national and regional levels is very pro-mining," says Christopher Ecclestone, a mining analyst for Hallgarten & Co. "It's in the blood."
For the moment SQM is waiting to see if the Chevy Volt is a hit. The company has launched a new advertising campaign that features the sunny slogan "Lithium: Driving Us to the Future." But SQM had better hope that automakers like Toyota don't drive right past lithium-ion technology en route to the Next Green Thing.
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