Lithium Blues

By Andy Home, Senior Metals Columnist

Welcome to Power Up. In today’s issue we look at lithium, the metal at the heart of the green energy transition. It hasn’t been a great week for lithium’s reputation after a fatal fire at a battery manufacturing plant in South Korea and it hasn’t been a great year for lithium producers as prices languish near three-year lows. But the global race for lithium supply continues to gather pace. Also in today’s edition, California’s rising battery storage capacity, Europe’s rare earths challenge and BP’s change of tack on renewable energy.  

Firefighters take a break as rescue work continues following a deadly fire at a lithium battery factory owned by South Korean battery maker Aricell, in Hwaseong, South Korea, June 24. REUTERS/Kim Hong-ji.

Lithium has been in the headlines this week for all the wrong reasons. A blaze ripped through a battery manufacturing plant in South Korea, killing 23 workers, most of them Chinese nationals. The country is one of the world’s powerhouses of battery manufacturing and authorities are urgently investigating what went wrong.  

Lithium prices, meanwhile, are stuck at three-year lows as the market works through an overhang of surplus supply. Eric Norris, head of energy storage at Albemarle, the world’s largest producer, admitted that prices are “concerning”, squeezing margins at existing operators and posing financing challenges for new projects. Even dominant producer China was worried enough for the Ministry of Industry and Information Technology to issue guidelines to check run-away expansion at every stage of the battery supply chain.  

Pricing is problematic in this opaque market with China’s Guangzhou exchange playing on outsize role in price determination. Albemarle has started holding online auctions of lithium products to “build trust” in the market, Norris said.  

Albemarle remains a believer in the energy transition metal’s bright future. “Our long-term demand projections are just as robust that they’ve always been,” Norris said. Others agree and the race to secure supply is only hotting up.  More than 50 companies have expressed interest in developing projects in Chile, which is looking to leverage its salt brine flats to become a major producer of the battery metal. Chile is engineering a tie-up between existing producer SQM and state copper producer Codelco to drive the sector’s development, much to the frustration of China’s Tianqi, which owns around a fifth of SQM. 

Chile is not the only country looking to place its lithium resources under state control. China’s Ganfeng has filed an arbitration case against the Mexican government, which has been forcing overseas investors to partner with the state in developing the country’s reserves.   

In Europe, meanwhile, there might be good news for Rio Tinto, whose plans to develop the giant Jadar project in Serbia were blocked in 2022 after large anti-mining protests. The company said new studies showed the $2.4 billion project would not damage the environment and the Serbian government seems to be ready to reconsider its decision to revoke the company’s mining licence. The European Union will also be hoping for a change of heart, given estimations Jadar could meet 90% of the region’s lithium demand once fully developed.

Lithium-ion batteries are not just for powering electric vehicles. They’re also the dominant technology in utility-scale energy storage systems. California is leading the way in building out battery storage capacity in the United States. Indeed, batteries can now be the largest single source of electricity during peak demand periods in the state power system. Gavin Maguire, global energy transition columnist, examines the implications at both state and national level. And if you’ve never heard of the “Duck Curve” phenomenon in renewable power pricing, this is where you’ll find out more.  

Rare earths are also essential to the green energy transition as inputs to the permanent magnets that power electric vehicles and wind turbines. That’s why the European Union is rapidly trying to build a rare earths supply chain to reduce dependency on dominant supplier China. Reuters metals reporter Eric Onstad offers a fascinating insight into what’s happening and, more importantly, what’s not happening in the bloc’s drive for self-sufficiency. And here’s a breakdown of the companies involved in the EU rare earths sector.  

BP’s new CEO Murray Auchincloss has slammed the brakes on his predecessor Bernard Looney’s pivot to renewable energy. The oil and gas major has imposed a hiring freeze and paused new offshore wind projects to assuage investor concerns about the company’s energy transition strategy. Reuters London energy reporter Ron Bousso gives the previously unreported lowdown on the change in corporate priorities.  

Russian energy company Novatek plans to start delivering the foundations for the second stage of its Arctic LNG 2 plant in late July, Reuters reports exclusively here. The company is pressing ahead with the mega liquid natural gas (LNG) project despite Western sanctions that have restricted access to technologies and limited the availability of specialist LNG tankers.  

The European Union is drafting new guidelines on how its members should split the costs of funding major new renewable energy projects, according to a document seen by Reuters. “We don’t underestimate the potential for conflicts, disputes and delay in projects of this complexity,” a senior EU official said. 

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