Brine evaporation is the lowest-cost method of producing lithium salts (LiCl) which are then processed into lithium carbonate. Albemarle (ABL) and SQM operations in Salar de Atacama in Chile are the lowest cost operations in the world for two reasons: high concentrations of lithium chloride and extremely dry conditions. Competitor Livent (LTHM) has similar operations in the Salar del Hombre Muerto in Argentina but lower concentrations reduce their cost advantage.

Salar de Atacama in Chile

The Salar de Atacama is one of the driest places in the world and the largest salt flat in Chile. It has an extremely high evaporation rate and low rainfall. Snow from the Andes Mountains melts and flows underground into pools of brine, which have the highest concentration of lithium globally. This high concentration makes the company one of the lowest-cost lithium producers even among brine-based producers. The company pumps the brine above ground into a network of large evaporation ponds. Water evaporates from the ponds over the course of approximately 18 months, leaving behind concentrated lithium brine, which is then processed into lithium derivatives, including lithium carbonate and lithium hydroxide for batteries. (Morningstar)

Greenbushes Spodumene Mine in WA

Mining pegmatite produces spodumene, which can be converted into lithium carbonate or lithium hydroxide. Costs are typically higher than brine production but lithium hydroxide can be produced directly from spodumene, whereas brine must first be processed into lithium carbonate. Fully integrated producers with low-cost spodumene mining operations are therefore able to produce lithium hydroxide at lower cost than producers converting from carbonate.

Although lithium hydroxide has traditionally made up a small portion of total lithium demand, electric vehicle (EV) batteries will increasingly use lithium hydroxide as hydroxide-based battery chemistries generally allow electric vehicles to have a greater range than lithium carbonate. As a result, we expect lithium hydroxide demand growth will outpace lithium carbonate as electric vehicle adoption increases.(Morningstar)

Albemarle (ABL), in collaboration with Argonne National Laboratory (USA), is conducting research into new processing technology which would eliminate the intermediate processing step, allowing brine producers to convert directly from lithium chloride to lithium hydroxide. (Albemarle)


Lithium supply is currently in surplus:

Excluding U.S. production, worldwide lithium production in 2019 decreased by 19% to 77,000 tons of lithium content from 95,000 tons of lithium content in 2018 in response to lithium production exceeding consumption and decreasing lithium prices. Global consumption of lithium in 2019 was estimated to be about 57,700 tons of lithium content, an increase of 18% from 49,100 tons of lithium content in 2018. However, consumption was lower than anticipated by the lithium industry owing to China scaling back subsidies on electric vehicles, consumers reducing lithium inventories, and lower electric vehicle sales volumes.

Spot lithium carbonate prices in China decreased from approximately $11,600 per ton at the beginning of the year to about $7,300 per ton in December. For large fixed contracts, the annual average U.S. lithium carbonate price was $13,000 per metric ton in 2019, a 24% decrease from that of 2018. Spot lithium hydroxide prices in China decreased from approximately $15,500 per ton at the beginning of the year to about $8,000 per ton in December.....

Six mineral operations in Australia, two brine operations each in Argentina and Chile, and one brine and one mineral operation in China accounted for the majority of world lithium production. Owing to overproduction and decreased prices, several established lithium operations postponed capacity expansion plans. Junior mining operations in Australia, Canada, and Namibia ceased production altogether. (US Geological Survey 2020)

Expected Demand

Demand is expected to grow rapidly, with the development of electric vehicles and renewable energy. The European Commission 2020 review of critical materials anticipates an annual requirement between 42,000 and 106,000 metric tons of lithium by 2030, with a mid-range forecast of 61,000 metric tons. That is 4 to 6 times current usage. Their mid-range forecast for 2050 is 158,000 metric tons, about double current global production.