The Battery Show North America recently played host to a critical discussion on North America's lithium supply challenges, a topic of growing interest in the world of investment. Moderator James Frith, a Principal with Volta Energy Technologies, set the stage by highlighting the significant challenges facing North America's lithium supply chain. Just a decade ago, a staggering 75% of the world's lithium supply came from China, Chile, and Australia. However, by 2030, the combined share of these countries in global lithium supply is projected to drop below 50%.

Perhaps even more striking is the fact that, in the upcoming year, there will be approximately 850 GWh of demand in the North American lithium marketplace, but only 350 GWh of supply. This stark supply-demand gap underscores the urgency of developing more North American-based lithium supply, especially with the rapid advancement of the electric vehicle (EV) market.

Ford Senior Manager of Value Chain and Quality, Rakesh Nahta, emphasized that addressing this challenge requires the combined efforts and substantial investments of companies, government bodies, and suppliers, including cathode makers. This collective effort is projected to require investments in the billions of dollars, as establishing more than 300 new mines for lithium, graphite, nickel, and cobalt will be necessary to meet the escalating demand for EVs by 2035, according to Benchmark Mineral Intelligence.

Albemarle, a leading global lithium producer, anticipates a significant surge in demand for lithium worldwide from 2025 to 2030, with almost all lithium sales dedicated to batteries, up from just 20% a decade ago. This shift towards lithium batteries is transformative and is driving innovation in battery technology. Lithium, traditionally used in cathodes, is being explored for other battery components, potentially increasing EV range significantly. Companies are also experimenting with lithium metal, a development that could lead to a 5% increase in energy density.

However, one of the major hurdles in expanding lithium production in North America is the slow approval process for lithium mines. Opening a new mine can take more than a decade, which poses a significant challenge, especially given the Biden administration's target of achieving 50% zero-emission vehicle sales by 2030. Nonetheless, Albemarle expects North America to comprise 20% of global demand by 2030, prompting battery cell manufacturers and automakers to invest billions in localizing the EV supply chain.

The Inflation Reduction Act has played a pivotal role in allowing Albemarle to expand its U.S. business. While the company's primary lithium resources are in Chile and Australia, North America offers the next-best lithium sites. This shift towards North American resources not only aids national security but also aligns with the Inflation Reduction Act incentives and reduces the length of customers' supply chains, a focus that has gained prominence after pandemic-era disruptions.

Moreover, the recent discovery of a massive lithium deposit in the Nevada–Oregon border region has generated significant excitement. Estimated to contain 20 to 40 million tonnes of lithium metal, this deposit could be a game-changer in the lithium industry. However, mining at the site is contentious due to its sacred significance to Native Americans and historical associations with a massacre.

The deposit's unique composition, rich in lithium, suggests that it could have a profound impact on global lithium dynamics, influencing prices, supply security, and geopolitics. The mining process, expected to begin in 2026, involves extracting lithium-bearing grains from clay, a potentially low-energy-intensive method that could significantly enhance the U.S.'s lithium supply.

One of the most critical challenges that looms over the future of direct lithium extraction (DLE) revolves around the complex relationship between its claimed water efficiency and the stark reality of its water consumption. DLE technologies have gained acclaim for their environmental advantages compared to conventional methods like hard rock mining and brine evaporation. Nevertheless, it's worth noting that certain DLE processes demand a staggering 180 metric tons of water to yield just one metric ton of lithium. This paradox has ignited considerable debate, especially in regions already grappling with water scarcity, where the imperative to conserve water is paramount.

In this delicate balance between technological innovation and community acceptance, the industry finds itself perched on a precipice. Any perceived mismanagement of water resources could undermine public trust, a precarious situation as DLE approaches full commercialization by 2025.

Acknowledging the gravity of this issue, developers of DLE technologies are proactively taking steps to mitigate their water footprint. A collective effort is underway to enhance freshwater recycling within the DLE process, allowing for more sustainable operations while preserving efficiency. The industry's focus extends beyond mere technological refinements; it also underscores the importance of responsible water management as a means to maintain community support. The success of these concerted efforts will be pivotal in securing DLE's long-term viability as a responsible and environmentally conscious alternative in the lithium production landscape.

The current state of the North American lithium supply chain stands at a pivotal crossroads. The confluence of surging demand, limited supply, and substantial investment requirements presents a multifaceted challenge. However, the potential benefits, encompassing economic and environmental advantages, are too significant to disregard. Whether it's the responsibility of corporations, governmental bodies, or retail investors like ourselves, each of us has a vital role to fulfill in this burgeoning lithium opportunity. Time is of the essence, and the race is underway.

It is important to note that this article serves as an informative resource and should not be regarded as a substitute for professional financial guidance. Investing in commodities such as lithium carries inherent risks, and it is advisable to conduct thorough research or seek advice from a qualified investment expert before making any investment decisions.