...like I mentioned in my earlier post on the thread, it is taken for granted that a long term growth for EV in the global market must necessarily translate into equally stronger demand and higher pricing for lithium.
In my earlier post below, I highlighted that the Chinese are already well ahead in commissioning new lithium outputs coming onstream this and next year (see below). This would flood the market and offset any plans by current incumbent producers to curb production in the near term.
Then I thought to check if Exxon is planning to proceed with its foray into lithium given current depressed pricing, and the answer is a firm Yes, undeterred by present conditions in the industry. Exxon is a big player and is investing $2B to begin production in just 3 years. This would fit in well with a possible 2 year hiatus with the current moderating demand for EVs and lithium, so it is poised to enter the market in the next up cycle.
But with Zimbabwe supplying to the Chinese market and Exxon supplying to the domestic US market, lithium supply going forwards is unlikely to be short of meeting demand, and consequently the high pricing we observed in 2020-21 for lithium and which have been used in many lithium developers PFS would probably never be revisited, and Australia would have to be competing against new competition that has yet to exist today.
On top of that, I believe BYD's market dominance over Tesla would continue to increase as it is able to produce EV cheaper than EV makers in US and Europe. It is also launching its Seagull BYD model soon which uses a sodium-ion battery that does not use lithium. Smaller EVs which are cheaper and made in China could dominate EV penetration in emerging markets including India and emerging economies over time. Battery chemical technological change could also determine the future growth demand requirement of lithium, which should also not be taken for granted. Already nickel and cobalt which began as a core mineral requirement for EV batteries are now relegated with lithium ferrous phosphate (LFP) batteries used largely in BYD vehicles.
Final note, there is often a debate on whether white gold lithium would replace black gold oil and in the early days, we were swamped with narrative of the death of oil. But narratives change over time and recent reality is that oil will sit with lithium to power vehicles ahead. However, Exxon's diversification into lithium speaks volume about the future of oil - as I said, watch what key industry leaders do.
While Exxon's decision to enter into lithium production is a vote of confidence in lithium, it is not favourable to any hope that we can return to the blue sky lithium prices. The only winner in this is the EV industry which needs cheap lithium price to make cheaper EV cars to be able to make higher growth penetration in the global vehicle market. And we can only expect that oil cartels would ensure that oil prices remain competitively low to slow the buyer conversion into EV. EV growth is also spurred by clean energy policies of Govts and that could be under threat from increasing rise of right wing Govts including the threat of the return of Trump which would be far less generous to subsidise and support EV growth.
Exxon is certainly hedging its bets both ways. Exxon to start lithium production for EVs in the US by 2027
U.S. oil firm sees global market for lithium from brine
China is the main supplier of refined lithium for EVs
Exxon to begin output with services provider Tetra Technologies
HOUSTON, Nov 13 (Reuters) - Exxon Mobil (XOM.N), opens new tab said on Monday it plans to start producing lithium from subsurface wells by 2027 to provide supplies of the key metal used in electric-car batteries and advanced electronics.
Oil majors are investing in the electrification sector as governments in the United States and Europe set programs to promote wider use of electric vehicles and reduce fossil-fuel consumption.
Exxon said it will start production from briny waters pumped out of the ground in an area in the state of Arkansas known to hold significant lithium deposits to help develop a domestic source of the metal.
"In the long term, lithium really is a global opportunity," said Dan Ammann, president of Exxon's Low Carbon business unit. "We are starting here because there is an urgent need to ramp up domestic production of these critical materials."
Exxon plans to supply lithium for well over 1 million EVs per year and become a leading supplier of the metal by 2030. Analysts at financial firm TD Cowen estimate its goal would require some $2 billion in capital expenditures to provide 50,000 tonnes, a volume that could generate $800 million in potential cash.Ammann did not disclose how much Exxon intends to invest in the lithium business, or when it might become profitable.
The largest U.S. oil company said it would use conventional oil and gas drilling methods to access lithium-rich saltwater from reservoirs about 10,000 feet underground and then use direct lithium extraction (DLE) technology to separate lithium from the saltwater.
The company's majority-owned Canadian affiliate, Imperial Oil (IMO.TO), opens new tab, also has invested in a lithium-extraction pilot project in Alberta, Canada.
Exxon plans to begin production with partner Tetra Technologies (TTI.N), opens new tab, Reuters exclusively reported on Saturday. It will produce the metal onsite and sell it under the brand name Mobil Lithium, the company said on Monday.
Exxon had acquired the rights to 120,000 gross acres of the Smackover Formation in Arkansas, a potential hub of activity for lithium brine aspirants, earlier this year.
Exxon, which invented the rechargeable lithium-ion battery in the 1970s, but stepped away from the technology, has no plans to invest in EV charging stations, Exxon's Ammann said.
It wants to supply lithium for EV batteries, consumer electronics and energy storage systems that can hold electricity generated from intermittent solar and wind power.
There are about 280 million vehicles in the United States today, and fewer than 3 million are EVs, or about 1% of the total, Ammann said.
"There is still 99% to go, which suggests it is a very, very big opportunity," he said.
LTR Price at posting:
$1.28 Sentiment: None Disclosure: Not Held
(20min delay)