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If there's one repeated refrain we hear about the high price of advanced lithium batteries that are needed for the mass adoption of pure electric cars, it's that economies of scale will one day make the packs reasonably affordable. This seems a likely scenario, but is it inevitable? A paragraph in a recent column by Jerry Flint in Forbes caught my eye. He writes:
There's the legend that with mass production the cost will go down. Maybe, but that's bunk when it comes to certain materials. Take oil. Production is way up from the old days, and so is the price--I remember $3 a barrel, but now it's around $70 today. Indeed, OPEC might be a model for LIEC, a lithium ion producers' cartel, when they realize how important it is.
Given what we know about lithium, does a continued high price seem reasonable to you? Bolivia has about half of the world's estimated lithium reserves, so what happens there will have a tremendous impact on how the global lithium economy sets rates. We've already heard Bolivian president Evo Morales call for a state-dominated lithium industry in order to ensure that the profits benefit the people of his country. This seems fair, up to a point, but following the OPEC way of constantly driving up prices through the years won't make Bolivia a lot of friends.

[Source: Forbes]



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    • 1 Second Ago
  • 31 Comments
      BipDBo
      • 5 Years Ago
      Again, your point is invalid. If the countries that produce lithium halt supply or greatly increase the price, then auto production stops. Sure the cars already built will work, but assembly lines would halt, dealerships would run out of electric cars and only sell the old gas cars, Car parts would be stock piled up, etc. If the American fleet of vehicles is to be replaced one day with electrics, it will take a while and require a steady stream of Lithium, just like we need a steady stream of petroleum right now. Sure, once we get that fleet, we will be able to recycle that Lithium but that is a long way off.

      A similar thing happened to the auto industry in the first half of the twentieth century. Auto desgns were greatly influenced by reduction in steel. There were a lot of cars being produced and the steel supplies couldn't keep up. Rag tops were standard and hard roofs were considered a luxury. The problem reached it's peak during WWII when pretty much all metal was routed to making ships. It was very hard to produce a car then. That's why Howard Hughes built his Hercules out of Spuce.

      I believe that after 20 to 40 years, almost all cars will be driven by electric motors. Those motors will be powered by batteries. Those batteries may be recharged by hydrogen fuel cells, gasoline or just a plug, but nonetheless, all electric cars will have batteries, probably lithium batteries. That's a lot of lithium. The US would do good for itself in investing in the infrasture to assure a steady steam of Lithium to complete the task.
      • 5 Years Ago
      The lithium in a battery isn't consumed when the vehicle runs, the electricity is consumed.

      The oil (refined) in a gas tank is consumed when the vehicle runs. So there is absolutely no comparing the two resources.

      The battery (lithium) just holds the electricity to be consumed. The closest analogy to a gas vehicle would be the gas tank. Nobody is worried about "Peak Gas Tanks" because the item holding the energy isn't consumed, it is the gas that is consumed.

      The next OPEC will be the electricity producers, not the lithium produces. The electricity is what is consumed to drive electric cars, like oil is consumed to drive gas vehicles.

      That means WE (the United States) will be the next OPEC.

      (with the help of canada....)
        • 5 Years Ago
        I have to agree here, even when the batteries are "wore out" the lithium is still there and can be re-refined. Unlike oil where once you burn it, its very difficult to get it back again.
        So in a few years, we will have the largest lithium deposits, in the form of used batteries.

        • 5 Years Ago
        The Lithium battery will not last the lifetime of a car, as per the present belief and calulation it could last up to ten years. The present day Lion battery of laptop hardly last three years. It cannot be considered as something like a gas tank that last the lifetime of a car and so require replacement. But the other side of the story is that it is possible to recover Lion from old batteries . Two companies are alredy up and coming in Japan for this. This gives hope for a contunued availability of the metal.
      • 5 Years Ago
      Oil has continued to go up not only because of opec, but because we use so much of it and most of the worlds oil fields are in decline. The light sweet crude oil that was easy to pump and close to the surface has all been pumped. In order to meed demand oil companies employ more costly extraction methods, more costly well locations and expend more energy refining of lower quality oil and tar sands.

      The lithium in Bolivia is abundant, easy to get, right on the surface and very little lithium has been extracted. Raw lithium prices very reasonable(compared to battery cells) and besides reserves in Bolivia, Russia and the United states you can extract the it from seawater so any cartel will have a difficult time maintaining a strangle hold on supply.

      Comparing lithium to oil is an easy story for reporters who don't know very much.
        • 5 Years Ago
        It doesn't help that China and India are adding new gas burning vehicles to the roads at an amazing, rate, either.

        The fact that US oil consumption is down considerably and gas is still $3/gallon and oil ~$70/gallon should make everyone worry about what will happen once the US economy starts growing again.
      • 5 Years Ago
      Correction: Bolivia has half of the worlds richest lithium ores, a large salt flat in the Andes. Lithium is fairly abundant so most nations have low reserves that can be tapped if the price went high enough. The only reason why most Lithium comes from Bolivia is that their lithium ores are particularly concentrated and easy to extract, thus has the lowest cost of production. But if Bolivia tried to raise prices too high, then other lithium sources would be tapped instead, that puts a natural limit on any attempts at price gouging.

      It sounds like Morales wants lithium battery production to be set up in Bolivia, which would make more profit for that country even with low lithium prices. But does Bolivia has enough technically trained workers and enough political stability for any lithium battery companies to set up manufacturing there?
      • 5 Years Ago
      Oil prices have been pretty stable over the years when priced in another commodity...Gold.

      Does anybody remember a thing called the “gold standard”?

      Anyway, there are 3 dynamics at work here:

      1) Supply vs Demand. As long as that demand is higher than supply, prices will remain high.

      2) The Fed is printing money like there’s no tomorrow so that politicians can punish winners by putting them into debt while bailing out their loser competitors. This $Trillions in "pumping" makes all US $Dollars worth LESS and therefore everything WILL cost MORE. That's called inflation and the tsunami is coming!

      3) When politicians choose technologies with taxpayer debt, competitive market forces cease to function with the SAME outcome as if those companies got together and formed a "cartel" to keep supply artificially low and prices artificially high. It’s NO LONGER about making a profit, it’s now about getting a handout. This is why Crony Capitalism (gov't-corporate partnership) is so popular with politicians and giant corporations who receive taxpayer "investment". This has been going on since 1913 and the Fed’s central economic planning!

      So, We, the People have 3 strikes against cheap batteries; (1) demand outpacing supply, (2) politicians pumping inflation and (3) crony capitalism instead of a free market.

      Jerry Flint is worried about cheap batteries whereas I'm worried that the fiat US $Dollar will collapse and nobody will be able to afford food, much less a new car!

      By the way, don’t let this NEW stock market bubble cause by the Fed’s debt-pumping fool you! This new bubble has a VERY thin skin demonstrated by the fact that it’s a Jobless one where credit is still not flowing and another wave of both residential and commercial real estate failure are immanent.
        • 5 Years Ago
        Agreed Tim, you guys are in seriouls financial straights and the only way out is to inflate your dollar. I've been following Peter Schiff for awhile now and I think he's spot on.

        So when all hell breaks loose down there, please keep the gun fighting on your side of the boarder. How much longer before you guys get that wall built along the US/Canada boarder? Maybe us Kanucks should be lending you a hand to get that project moving! :-)

        And what the hell's with all the rednecks showing up at town hall meetings with guns???

        Jesus Christ, lock those gun totters up and let the dope smokers go! That's just Bass Ackwards.
        • 5 Years Ago
        Tim, I applaud your new tone, even if I disagree with you.

        For more on inflation, Obama supporter and richest man in the world Warren Buffett just put an editorial in the NY Times:
        http://www.nytimes.com/2009/08/19/opinion/19buffett.html?hp

        We do need to curb spending and increase taxes once the economy recovers to keep inflation in check and get the deficit under control. However, where do we cut? All non-millitary discretionary spending will total 600 Billion this year (and that is temporarily inflated by stimulus spending)- about 1/3 of the deficit. Even if we eliminate all spending for infrastructure, agriculture, education, energy, securuty, environment, etc., it will not come close to balancing the budget. In general, investments in R&D and Education have had significant ROI for the taxpayer. Government-funded R&D brings technology forward- creating a feasible business plan for advanced technologies before it makes sense for private businesses to invest in them. This puts a nation's businesses at a competitive advantage to other countries. The governments in Germany, China, Japan and other nations are also all investing in this, and we will end up behind the rest of the world if we wait for our markets to catch up. Government investment in the future is where we should be putting our money. And even with the proposed increases, it is only a tiny sliver of the budget- much less than we pay for gulf oil subsidies, less than the tax impact of the trade deficit from petroleum, or for millitary operations in oil producing regions.

        About half of the Federal budget goes for retirees/the elderly (Social Security, Medicare, Pensions, VA, etc.)- we literally can not balance the budget without raising taxes unless we tell grandma no on something. The biggest line item is health care (which primarily goes to the elderly). In terms of $ spent: our individuals pay more than individuals in any other country for health care, our businesses pay more than businesses in any other country for health care, AND our government pays more than any other government for health care (even though we are the only country in the industrialized world without universal coverage). Our individuals, businesses and government are all paying more- added together, it is more than twice what any other country spends. And our health care system ends up being ranked 37th in the world:
        http://www.photius.com/rankings/healthranks.html

        We need to get the national debt under control, but cutting R&D and technology will not get us there. We should not sacrifice investing in the future with to fund entitlements because we will end up losing in the long run...
        http://www.pgpf.org/getinvolved/citizens-guide/
        • 5 Years Ago
        Tim,
        I share your fear on Hyperinflation,
        but,
        the government has again started publishing M3, and a few months ago there did not seem to be a rush to pump dollars into the economy. More up-to-date info would be helpful.

        But, remember, some people who hawk hyperinflation have gold positions they need to talk up.

        Some people view gold has a good holding in a hyperinflation environment, but, I hold the view that if it gets that bad, what you want to be bartering is handguns and ammo.

        [ I don't hold gun or ammo manufacturing stock. ]
      • 5 Years Ago
      The top 2 suppliers of Lithium in the world are Chile and Australia. Bolivia doesn't even HAVE a lithium mine operating, yet twits who write for a living have it cornering the market already. That's simply retarded!

      These writers needs to do some basic research! Do a fact check by looking up "lithium' in Wikipedia for a start before publishing such rubbish!

      Some facts, lithium based batteries are:

      a) A durable product, not an organic compound that is burnt to produce energy!
      b) Li-ion batteries are recyclable.
      c) There are plenty of competing energy storage medium. IF a cartel tried to extort the market, the competition would simply take more market share.

      • 5 Years Ago
      First, there's not that much lithium in a battery. A Lithium ion battery is a combination of lithium, cobolt and other minerals in an electrolyte. There are literally millions of chemical combinations to making an Li battery. Second, batteries are not the only use of Li. According to the USGS, "global end-use markets are estimated as follows: batteries, 25%; ceramics and glass, 18%; lubricating greases, 12%; pharmaceuticals and polymers, 7%; air conditioning, 6%; primary aluminum production, 4%; continuous casting, 3%; chemical processing 3%; and other uses, 22%."

      Diversity of use ensures less price volitility. Petroleum is also used for things other than energy: making plastics, chemicals and synthetic rubber, but 82% of petroleum is used for energy.

      The smartest thing to do is to diversify our transportation energy use by using batteries, fuel cells and efficient combustion engines using biofuels.
      • 5 Years Ago
      When discussing a subject it might be worthwhile to know what you are talking about.

      The USA is the Saudi Arabia of Lithium reserves , I is true that Bolivia and Chile have the high proportion of of current production, bu that is merely temporary, The US used to be the worlds supplier holding vast reserves, until these extremely rich brines were discovered in the Atacama desert.

      So American mines were mothballed, while the South American brines were exploited. Newcomers to the scene look at the rater limited Lithium reserves in the desert brines, and consider an OPEC scenario, These cloaca cavities are always looking for the dark cloud, and doomsday, and never reality. Bur their ersatz Nature Worship, or modern Druidism religion, teaches than that the World would be better off without people in i , so they incessantly sing that theme song, even when it has no meaning. For a clearer picture see::

      http://www.worldlithium.com/AN_ABUNDANCE_OF_LITHIUM_-_Part_2.html

      Lithium is 6% of the Earth;s crust and it can be recycled unlike petroleum when it is simply burned. I look forward to the day when most petroleum products are routinely recycled as reused plastics are today. When our technology improves, as it is doing, we won't simply consume valuable petroleum feed-stocks as fuel.
      • 5 Years Ago
      Eventually it may happen, but for now the tremendous volume increase offered by the automotive market is too tempting to ruin by price fixing. OPEC, which produces about half of the world's oil, can fix prices because they can cut production more than anyone else can increase production. I don't think we can say the same for Li battery producers. There isn't enough consensus/capacity to cut production enough to offset the increase in production of competitors, and for the industry as a whole that's counterproductive considering how much larger the world traction battery market will probably be. Unless they can charge a hundred times what they currently do, while being able to marginalize competitors, while still selling what they do currently, it would make no economic sense to behave like OPEC.
      • 5 Years Ago
      Lithium Chemicals Price Trend: Dominating lithium producer SQM in September 2009 announced 20% price reductions. Lithium prices have been stagnant through 2009: Given market conditions falling prices would be expected but they have been superficially bolstered by the steep fall in the US dollar against lithium producer and user currencies. TRU president Edward R Anderson says “the SQM price reduction was a necessary correction and consistent with the TRU lithium over-supply scenario. Indeed, there is little prospect for price volatility even long range. Prevailing lithium carbonate contract trade prices are much lower than stated by most new project promoters and several (misinformed) analysts. Any new producer must be prepared to meet these lower large volume prices. TRU projects an orderly and balanced development of the lithium industry through the 2020 horizon and this translates to price stability”.
      http://trugroup.com/Lithium-Market-Conference.html
      • 5 Years Ago
      Why do all the unstable countries win the natural resource lottery? I guess Bolivia is not so bad, it could be worse. The country can definitely use the revenue infusion.
        • 5 Years Ago
        MATT:

        If the US goes around touting "morals" and "freedom" to everyone, you better freaking believe it should be helping everyone...especially when it's busy making back-door deals with all regimes is financing and propping up.

        Do you think the US is "handing out and feeding" the world out of the goodness of its little heart?

        Spare us the "we defend freedom" crap. It's really really old.
        • 5 Years Ago
        You mean like America? In terms of fertile soil, rainfall, and vast tracts of land on which to grow things, (oh, and coal, timber, and a boatload of other minerals) America has hit the jackpot. Saudi Arabia, not so much.

        Actually, Saudi Arabia is a pretty stable place politically. They're even pretty tolerant of overall American assholery and have even been nice enough to buy vast tracts of American land...
        • 5 Years Ago
        @Ernie

        Yeah, because America doesn't feed the rest of the world or anything. Oh, and we do it below cost (or for free, or in some cases at our expense!) a lot of the time. We defend freedom around the world at no cost to the countries under attack, we do our best to have a real democracy, and generally make an effort to share our wealth... but you're right, we're assholes.
        • 5 Years Ago
        Just one clarification to cthormahlen:
        Lithium is an element. A basic building block. It is like gold. It can not be synthesized.
        This is what the whole brouhaha is about.
        Sorry about that.
        • 5 Years Ago
        @cthormahlen
        "The guy from the NYT is clueless"

        It was Fobes, not the NY Times. I have a feeling our "elite" newspaper would take that as an insult to be confused with a magazine run by a former Republican Presidential candidate.

        Here is the article:
        http://www.forbes.com/2009/08/18/electric-cars-detroit-business-autos-backseat-driver.html?feed=rss_news

        he is wrong on a number of levels- from the impact of Lithium to the current cost of the batteries
        • 5 Years Ago
        @Matt

        You really are oblivious as to why there is US presence in foreign countries. US foreign policy is not dictated out of the goodness of US hearts, it is dictated out of geo-political control and resource acquisitions. Open your eyes buddy! Oh and by the way, another 56 people were killed in oil-rich Iraq today and another 560 wounded! I believe that Ernie, using the term "US assholery", was putting it mildly.
        • 5 Years Ago
        Oh, and Epyx:

        Aside from his comment that Americans are "assholes" Ernie is right; the most fertile land on earth is right below your feet. The United States has fertility and diversity, oil, food, forests, lakes, rivers, oceans, mountains, plains, etc. We've got it all, you just have to go out and make use of it.
        • 5 Years Ago
        Epyx,

        The people of these countries do not win any lotteries. They live in misery. Having resources that a super power wants is a curse...not a blessing. I wouldn't wish it on my enemy.
        • 5 Years Ago
        The guy from the NYT is clueless. Petroleum is a complex material that is prohibitively expensive to synthesize in a lab, so the supply is ultimately fixed; OPEC is simply rationing oil production to conserve their resource and maximize short term profits. Lithium is an extremely simple atomic element that is easily synthesized in a lab; Lithium supplies are virtually unlimited. We'll run out of iron before we do lithium. Bolivia is an intolerable basket case and Evo is only digging them deeper holes and burning more bridges; they will be bankrupt before the next decade is out.
      BipDBo
      • 5 Years Ago
      Why would it matter if Lithium were used for energy, food, or hygene products? It's irrelevant. The point is that Lithium is a material that will be in high demand. When you have a material that is in high demand, and short supply, the price goes up. It's the classic supply-demand scenario. Lithium battery manufacturing composes of 3 different kinds of resources; material, technology, and manufacturing. Technology and manufacturing react to the market according to economies of scale; ie when production is high, prices go down, which is the opposite manner that materials react. The question will be, which factors will win out?
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