Tesla (TSLA) CEO Elon Musk this previous week reminded buyers of a rising problem within the US in relation to the electrical automobile trade — securing refined lithium for EV batteries.
“The choke level is way more on refining capability than it’s on mining. Lithium is definitely is quite common all through the world, together with within the US,” Musk stated on Tesla’s earnings name. “It is way more a query of the place is the refining capability and might the refining capability sustain.”
Musk highlighted Tesla’s plan for a lithium refinery close to Corpus Christi, Texas which breaks floor in Could.
Musk additionally took the chance, as he is performed up to now, to name on different entrepreneurs to refine extra of the mineral utilized in batteries to energy electrical autos.
“Like, as a substitute of constructing an image sharing app, please refine lithium. Mining and refining, heavy trade, come on,” stated Musk.
‘The place is all the fabric going to return from?’
At the moment, a lot of the world’s lithium refining occurs in China and is directed on the nation’s personal rising EV market.
However the Biden Administration’s push in the direction of greener applied sciences is about to create large demand for lithium right here within the US.
“We at the moment within the US produce round 20,000 tons of lithium hydroxide refined within the US. We predict we’d like over 700,000 by the second half of this decade. So, 35 instances extra,” Keith Phillips, CEO of Piedmont Lithium, whose clients embody Tesla and LG Chem, informed Yahoo Finance in an interview.
“All of this is a bit more future dealing with — and the query I believe is — the place is all the fabric going to return from?”
Piedmont Lithium is the method of constructing an built-in mine and refinery in North Carolina, in addition to a refining facility in Tennessee. The corporate can be concerned with tasks in Quebec and Ghana.
“We want extra of each,” stated Phillips. “We want extra refinery capability, clearly. As a result of you may’t make a battery with [rocks]. You want refined chemical substances. And the determined want — I believe — is for extra uncooked materials out of the bottom. And the extra of that we are able to produce within the US the higher.”
Lithium reserves have been recognized within the US. Nonetheless mining tasks final a few decade to finish. Refineries take about two years to deliver on-line.
“You’ll be able to’t simply flick a swap and convey extra metals to the market,” Financial institution of America analyst Michael Widmer lately informed Yahoo Finance Stay.
Widmer’s analysis reveals international locations all over the world should handle quite a few metals and mining shortages, together with lithium, copper, nickel, and aluminum.
“Backside line … for lots of the commodities, we’re simply not sinking sufficient cash into the bottom in the meanwhile,” Widmer stated.
‘Lithium has dropped quite a bit’
Lithium costs peaked in 2022 and have since fallen greater than 50%.
Musk — who final April highlighted lithium costs had risen to “insane levels!,” made word of their decline this previous week.
“Lithium has dropped quite a bit. It is price mentioning that value of lithium has dropped considerably,” Musk stated on the decision.
Falling commodity prices are anticipated to assist Tesla’s margins as strikes from the EV maker to slash the value of its vehicles in China and the US weighed on earnings in its newest quarter.
Regardless of lithium’s decline, nonetheless, costs are up about thrice from two years in the past, and comes at a time when the transition to EVs continues to be a magnet for most automakers.
Ford (F), as an example, lately introduced plans to construct a brand new $3.5 billion EV battery plant in Michigan in partnership with a Chinese language provider.
“I believe within the very long term, when extra mines are found, when extra refineries are constructed, when recycling turns into an element, you realize, 10 plus years from now, I believe this market will look much more like a copper or an oil the place the provision demand steadiness is extra in sync,” Piedmont Lithium’s informed Yahoo Finance.
“Proper now. Basically, there aren’t practically sufficient mines and refineries constructed to serve all of the battery vegetation which can be being constructed. The lithium trade is de facto enjoying catch up.”
Ines is a senior enterprise reporter for Yahoo Finance. Comply with her on Twitter at @ines_ferre
Click on right here for the newest inventory market information and in-depth evaluation, together with occasions that transfer shares
Learn the newest monetary and enterprise information from Yahoo Finance