Mining and car-making is an unlikely marriage on the face of it. Watch any TV advert for the latest electric-car, and how the lithium is extracted from a brine resource in say Argentina is not going to be foremost on people’s minds.
But the two worlds are colliding amid tight supply and higher lithium prices.
For a couple of years now, carmakers from BMW to Ford have started to cut out the middlemen by signing multi-year lithium supply contracts directly with the mining companies. Those discussions are taking a new turn, according to Paul Graves, CEO of Livent Corp., which manufactures lithium products for batteries. Among the more forward-looking carmakers, the option of an OEM financially backing a new lithium project is on the table, he said, without providing names.
Demand for EVs is surging and no matter how fast lithium miners increase their capacity, it’s never enough. The supply chain is forever playing catch up to the OEMs’ success in developing EV technology and rolling out a desirable stable of cars. Livent itself last week announced multiple expansion projects in lithium carbonate and lithium hydroxide, and it’s doubling its stake in the Canadian spodumene-to-hydroxide facility, Nemaska, to 50%.
Initially, carmakers were happy to outsource the lithium issue to the battery chain, after all, the developers of the cathodes governing the power and range of an EV engine are the experts. Today, the BMWs and the Fords of this world are increasingly showing they want direct oversight. They are buying the lithium and supplying it to the battery-cell manufacturers. This fundamentally shifts the relationship between miner and carmaker, potentially weakening the hand of the cathode players that are already facing signs of commodisation in their market.
When it comes to EV and battery technology, companies hold their cards very, very close to their chest. If an OEM invests in a lithium mine, a company like Livent would need to be privy to their inner most strategic plans. Key topics include what amount of lithium will a carmaker want, in which region, and when will they have a recycling stream, plus what’s their approach to procuring more sustainable lithium, Livent’s Graves said on a call.
“All of these conversations frankly can only happen with an OEM and they are starting to happen with the more progressive OEMs,” said Graves.
Maybe BMW directly investing to get a lithium project off the ground is not so far fetched. Back in the day, Ford turned its hand to many parts of its supply chain. Its integrated manufacturing process included knocking out its own steel and components under one roof.