Catalyst with Shayle Kann - Lithium’s wild ride

Episode Date: January 2, 2025

If you’ve followed global lithium prices over the past few years, you know what a wild ride it’s been. Chinese spot prices shot to record highs in 2022 and then came crashing back down by 2024 — with big consequences for batteries and EVs that depend on the mineral.  So what happened? And what could happen next, especially as EV sales have been slower than expected? In this episode, Shayle talks to Ernest Scheyder, author of “The War Below: Lithium, Copper, and the Global Battle to Power Our Lives” and senior correspondent at Reuters. They walk through the basics of lithium production and the recent timeline of key events affecting the industry, covering topics like: Why more of the world’s lithium comes from hard rock spodumene than salt brines How lithium is not one commodity at one price, but actually a variety of forms of the mineral at different prices Lithium’s shift from a niche industry serving nuclear and pharmaceutical supply chains to a global force supplying the battery transition The current oversupply, driven by Chinese producers that operate at a loss, and the western companies that are trying to challenge them Chile’s efforts to nationalize its lithium industry and shift to direct lithium extraction, which has not worked at commercial scale Recommended resources Simon & Schuster: The War Below: Lithium, Copper, and the Global Battle to Power Our Lives Latitude Media: Are things about to turn around for the U.S. battery sector? Catalyst: The EV market’s awkward teenage years Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform, by visiting energyhub.com. Catalyst is brought to you by Antenna Group, the public relations and strategic marketing agency of choice for climate and energy leaders. If you're a startup, investor, or global corporation that's looking to tell your climate story, demonstrate your impact, or accelerate your growth, Antenna Group's team of industry insiders is ready to help. Learn more at antennagroup.com.

Latitude Media, podcast at the frontier of climate technology. I'm Shail Khan, and this is Catalyst. Many of these companies were sort of focused on their relatively small patches. Now they are sort of on a global scale supplying some of the largest manufacturers out there, like Tesla, like Volkswagen, etc., all of whom are hungry for fresh supplies of lithium. Coming up, brine, hard rock, carbonate, hydroxide, smackover. We're talking lithium.

When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility, built for the moments when utilities can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale. predictive, verifiable, and designed to perform when it counts. Learn more at Energy Hub.com.

Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy.

Tune in as we unpack how progress is actually made. Listen to critical capital on Spotify, Apple, or wherever you get your podcasts. I'm Shail Khan. I invest in revolutionary climate technologies and energy impact partners. Welcome. So for some reason, I've always loved commodity markets. I mean, they're notoriously bad from a venture investment standpoint, of course. But just from an interest standpoint, I don't know, I find them fascinating.

and there are plenty that are relevant to climate, fortunately for me, obviously. There's electricity, there's steel, there's copper. Clearly, oil and gas is super relevant as well. But to me, one of the most interesting is lithium. It's a much smaller market than any of the others I just mentioned, I should note, but the demand growth trajectory is also steeper, and it's got all the makings of a super volatile commodity landscape. There are geopolitical things going on in South America.

and in China, there are new technologies potentially showing up. And then there's a crazy commodity price cycle that we've seen play out in this market just over the past three or four years that has been kind of a whirlwind and created a lot of whiplash for players up and down the value chain. We've talked a lot about batteries and battery metals even, including lithium on this podcast before, but really we've done that in the context of the final lithium chemicals that go into the battery and not so much in the lithium supply chain itself.

So let's fix that. For this one, I brought on Ernest Scheider. He's the author of a book on the topic. His book was called The War Below, Lithium, Copper, and the Global Battle to Power Our Lives. It's a good read, but this is also a good conversation. Here's Ernest. Ernest, welcome. Hey, it's great to be with your show.

All right, let's talk lithium. Starting with, I guess, where we get it from. Can you talk to me about Brian, talk to me about hard rock? Where do we get our lithium? I thought you'd never ask. Boy, it's great to talk about one of my favorite metals here. Lithium, obviously, extremely important for our global economy right now, and there's a huge focus on where and how it's produced.

Right now, there's two main source rock, if you will, or sources. As you say, Brian or hard rock. Brian typically is found in huge parts of Western South America. Brian is essentially salty water, and it is teeming with lithium, with calcium, with magnesium, depending on the deposit. it. And the main way that it's produced right now is large evaporation ponds. So you might have seen photos from northern Chile's Atacama Desert, where you see these big, huge acres, hundreds of acre-sized ponds that are each sort of different hues of blue. You got cyan and maybe some

light purple, et cetera, et cetera. That's because there's a chemical step taken to remove those different metals from that brine. And lithium, of course, being a main one that Chile produces there. So that's sort of the main way that Brian is produced right now. There's also a hard rock. Spodgamine is typically the type of source rock that lithium can be found in. And this is very abundant in parts of Australia, parts of the eastern United States, excuse me, and parts of Africa. And that production process is more akin to what you would think of as traditional mining, where you've got large blasting, you've got large caterpillar trucks, you've got large crushers and et cetera, et cetera.

So it's more what you would think of as the stereotypical mining operation. Right now, those are the two main ways to produce lithium. Chile, as I mentioned, is one of the world's largest lithium producers and the world's largest brine producer. Australia is the world's largest lithium produced because of its large spodgamine or hard rock mines. But there is huge competition across the world to find new ways or novel ways to produce it as well from other sources, including clay and then including direct lithium extraction. Yeah, I want to come back to DLE and talk a little bit about clay. But as it stands today, like, what's the breakdown? How much of world lithium production is brine versus hard rock? I mean, right now there's definitely more lithium production in the world from hard rock than there is from brine.

That's due to a host of factors, not the least of which is just speed. It's faster to take this hard rock out of the ground, crush it and then use chemical processing to make lithium that it is to evaporate lithium out of brine, a process that can take many, many, many months and needs to be done in a place where it obviously doesn't rain. So northern Chile in the Atacama Desert, one of the driest places in the world, it makes sense that companies like Albemarle and SQM are producing it there where there's very little precipitation. They wouldn't be able to do that in, say, Germany or Arkansas or other places that have large brine deposits but have lots of precipitation. So the big trend definitely is is for more hard rock out there now. That's due to a host of factors.

One of them is because it's easier to make lithium hydroxide from spodumine produced lithium than it is from brine. There's an extra step needed if you were to take lithium for brine and then to turn it from lithium carbonate into lithium hydroxide. That's a good segue. I wanted to talk about lithium chemicals next because that's obviously the next step in the value chain. So you get your lithium either out of brine or out of hard rock.

And then there's basically two pathways. carbonate, lithium hydroxide. Can you talk through what are the different use cases, I guess, for each of those two? Like what drives demand for one versus the other? And then maybe, as you said, walk through which ones come from which path predominantly, the brine path or the hard rock path? Yeah. I mean, I think the operative word you used there subconsciously was drive the demand, too. I mean, different automakers have different needs depending on the type of battery they want to produce. So BMW, for instance, likes lithium hydroxide, because, It's basically a higher performing type of lithium.

It can help extend a range for a battery. Granted, there are a lot of factors that go into a battery's range, but hydroxide can be better. Hydroxide's better in certain weather conditions. So if you're operating in cold climates, you might want hydroxide. It also tends to be more expensive because it has these higher performing characteristics. So if you're making something that does not necessarily need to have high performing characteristics, like a watch battery, for instance, you might go with carbonate or sort of,

a basic device powered by a simple lithium ion battery, you would go with carbonate. So depending on the type of end product that you're using, you're going to use a different type of lithium there. And there's also different qualities there. So battery grade lithium tends to be more highly processed than a more simple version there. So I guess the point I'm trying to make here is not all lithium is created equal or processed equally. You do have, as you say, lithium, carbonate, and hydroxide.

and then there can be different sort of quality versions of carbonate in there. Carbonate sort of being, I guess, the most basic version of it. Think of it like flour. Like you got your sort of basic white flour, but then you could have rye flour or flour that doesn't actually have flour and it can still be used for baking, et cetera, et cetera, et cetera, if you were to sort of use this baking analogy. Yeah. My basic understanding, tell me where I'm going to get this wrong.

Okay, so in the cost curve of current lithium production, the lowest cost research, tend, I think, to be the brine, some of the big brine resources in South America, right? The brine in Otacama, right? So that's the lowest cost of production from an OPEC's perspective. But it's brine, and so it's easy to make lithium carbonate. If you want to make lithium hydroxide, there's an extra processing step, so you pay a little bit extra to do that. On the other hand, the higher cost resources tend to be the hard rock resources,

mostly in Western Australia. But they have the benefit of going, you can go direct lithium hydroxide, basically, if you want to. And so they can afford to be a little bit more expensive on the cost curve, generally speaking, if there is sufficient demand for lithium hydroxide, which, as you said, tends to come more from, like, battery makers who want to make high nickel cathode, you know, long range type of EVs. And so it's not as simple as you might imagine the commodity market being, because in a normal commodity market where the products are exactly the same, there's just a cost curve and you just cut off the cost curve somewhere, depending on what the current market price is. but here you've got this additional dynamic of like two different intermediate products that come out of it which I think perhaps helps to explain why it's complex who ramps up and shuts down at any given time. We're going to talk more about what's happened in lithium pricing over the past

few years which has been a wild ride but one of the results of it has been I've noticed like what seems like non-obvious choices unless you really understand this from some of the major players in contrast to like the oil market where it's fairly straightforward, price drops below X dollars a barrel, you know, Y player shuts off. So there's that additional complexity there. The other complexity I guess I want to ask you about, though, is who's doing that refining, who's doing that processing, and how does that differ from different types of resources?

Well, two guesses, Shail, and who actually leads processing for most of these types of lithium? I'll just jump in to China. You wanted me to actually guess China. Yeah. Okay. Yeah. I mean, China is the world's largest processor for many of these types of lithium. So we were talking about Australia and Chile earlier in the conversation.

I mean, much of that lithium is shipped to mainland China, where it's processed into a form that can be put into a cathode, which then goes into a battery, et cetera, et cetera, et cetera. And so that's due to a host of reasons. One of the main reasons is that China is the world's largest EV market. And of course, that's where we've seen a lot of the spike in demand in recent years. China is a large manufacturer of other electronics as well. So it makes sense that companies like Albemar, a world's largest lithium company,

have many lithium processing facilities in mainland China. And so that's sort of the current market dynamic there right now. We have seen a lot of interests from other regions of the world, the U.S., the European Union, etc., to increase lithium processing. They've been experiencing various degrees of success or not success, depending on sort of how you look at it, the market dynamics right now are pretty tough for lithium producers writ large. So the idea of spending a billion or $2 billion on a lithium processing facility does not

necessarily engender warm, fuzzy feelings. The investors are many of these companies for obvious reasons. In fact, I just saw, I think this week that we were recording, GALP, who's a Portuguese energy company, was going to build a lithium refinery in Portugal, I believe, with Northfold, which they just canceled. Yeah, Northwold obviously has other concerns on its plate as well right now. It's a tough market, and, you know, I mean, maybe now is it time to get into pricing. I don't know, but like we definitely see, given the current pricing dynamics,

that many Western lithium companies are having to curtail their expansion plans because Chinese-linked rivals are increasing production or not curtailing their own production, i.e. they're operating at a loss, essentially, in a pretty transparent bid for market share. And so while we are seeing demand for lithium continue to rise, and we are seeing more people in the world buying electric vehicles, we are also seeing a supply glut of lithium out there, of all types, including carbonate, including hydroxide. And so that obviously has a huge effect on the price. And I should also sort of, you know, to make a little parenthetical here, that there's not just one price for lithium out there. There's many, many, many different types of price. And so that

actually leads to confusion. The average retail investor will probably look at the Chinese spot price for lithium carbonate and sort of see that as an indicator for the global price of lithium. But yes, you could say that given the China's role in the global EV market, given China's gargantuan demand for lithium, that that could be seen as a stand-in. We also know that there are many, many different types of contracts out there that many companies are beginning to use that don't reflect that price. The CME in Chicago is beginning to actively trade. The LME in London has plans to trade lithium. We'll see where these both go in the future. But that's one point that I would make is that there are many different prices of lithium out there. Then one price does

not fit all. Unlike oil, where Brent or WTI tend to be the two that folks look at when they think about the global price of oil. Okay. So point taken on that there's no single price. for lithium. But let's talk about pricing because it has been a wild ride for the past few years there. I don't know what benchmark you want to use to describe it, but what has happened to pricing? I mean, take me back maybe five, ten years and then draw the history of lithium pricing. Yeah, well, let's remember shale. I mean, lithium historically was a pretty niche industry. It, you know, let's just say mid-20th century, one of its main uses was in the atomic industry. That's part of the reason why the U.S. developed this huge lithium industry in western, excuse me,

in the eastern part of the United States in North Carolina. We've seen companies like Albemar and Arcadium are the legacies of much of this lithium investment in that area. But the primary use was around things like drugs, you know, because lithium has a mood stabilizing effect. on the human brain or greases or glasses or glass, I should say. So it wasn't exactly sort of this mass-needed type of mineral out there. And so that really changed as the lithium ion battery was invented, as more and more devices were made portable. And so you started to see, especially the past decade as demand has spiked, that there's been a huge hunt for it out there. And then, of course, an increase in the corresponding prices of the metal that's out there. And so you have to see different

players making different contracts. And so whereas many of these companies were sort of focused on their small, relatively small patches, now they are sort of on a global scale supplying some of the largest manufacturers out there like Tesla, like Volkswagen, etc., all of whom are hungry for fresh supplies of lithium. And that has led to a lot of people wanted to get into the space. And of course, like with any commodity market, you know, if demand is high and supply is low, the price typically tends to go up. But now we're starting to see a lot more supply come on the global market. even while demand is going up, we're still starting to see supply, in some cases, outstrip demand. And so that has had a deleterious effect, of course, on the price.

So, but what actually happened, right? So prices spiked like crazy in, I don't remember the exact timing, 2021 or thereabouts. Right around there, yeah. Right. That got up to what, like, okay, to your point, like the price everybody quotes, which is the China spot price up in the like $80,000 range or something like that. Yeah, that sounds familiar. Right.

And then crashed. and now they're back way below that again. So there was this run-up. What was actually happening there? Was it buyers, you know, was there a frenzy to lock up supply because there was a fear that there would be under supply? And it turns out that that under supply was a mirage? Or was it there actually was under supply and then a bunch of new supply came online in the past

couple of years? Like what caused such a spike in a crash? Do we know? Well, let's remember the global context in which we were in 2021. I mean, we were in sort of the first full year of a global pandemic. There was a lot of attention on sort of the future economy where we as a planet we're going to go, not just for transportation, but just electronics in general. There was a lot of focus on the future in the United States.

The next year, the Inflation Reduction Act was signed. So this 2021, 2022, we saw a huge interest in just renewable technologies in general continue to grow. And I think that fueled a huge focus around junior miners, not just in the United States, but globally on new ways to produce lithium. So that led to a lot of strong interest in the space from retail investors. And so you started to see equity valuations surge that were out there. We also at that point started to see, we hadn't yet seen a lot of supply come online. So yes, there was a lot of hopeful potential that there was going to be huge demand for this metal moving forward.

We saw a lot of predictions by a lot of consultants and analysts on where lithium demand is going. So that had a correlating effect on the price. And so, of course, we saw the price go up. Now, we have seen some more supply, a lot more supply come online in the ensuing years. We've also had a huge geopolitical, I should say, realignment in the past few months, which has sort of changed, I think, how people maybe tempered perhaps sort of this really, really strong expectation that we're going to see everything go electric. I think probably what's going to end up happening is we're going to have a bigger mix,

moving forward with a petroleum-based economy. And so I think it's been, I think temperate might be the right word here, that things have been a little more tempered than people had expected in 2021, 2022. Virtual power plants are becoming a reliable way for utilities to manage capacity. But enrolling devices is just the start. What really matters is confidence, knowing those resources will perform when dispatched and being able to prove it from the control room to the living room. Energy Hub's platform handles the full picture, from near real-time forecasting,

locational dispatch, and the kind of rigorous verification that holds up when regulators, grid operators, or leadership ask, did it deliver? Easy enrollment creates momentum, proven performance builds trust. That's why more than 170 utilities rely on Energy Hub to manage over 2.5 million devices delivering 3.4 gigawatts of flexible capacity. See what that looks like at energyhub.com. We're living through a profound economic shift, and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers,

but the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital, as I talk with people deploying capital, shaping policy and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to critical capital on Spotify, Apple, or wherever you get your podcasts. Let's talk a little bit about, I mean, you sort of alluded to this, but there are a few interesting elements of geopolitics that play into the lithium market. There's a Chile thing, and we should talk

about what happened with Chile and nationalization. And then there's obviously a China thing. There are other countries that are relevant as well, but those two feel like the big, the big geopolitical movers here. So let's start with Chile, because that one's kind of interesting. As we've talked about, Chile is the largest brine producer in the world, the second largest producer overall behind Australia. What happened in Chile a couple years ago? Yeah, I was actually in Santiago the night that President Gabriel Borich announced on national television that he was essentially going to take steps that would nationalize the country's lithium industry. Now, the word nationalization obviously has a loaded connotation, especially in parts of central and South

America. But what he was saying is that the lithium in Chile belongs to the Chilean people, and that should be controlled by Chilean state-backed companies. And so we just actually saw, let me take a step back. There are two main companies right now that produce in Chile, Alamarlane SQM. They produce in the Salad de Atacama, which is this sort of massive of Solar, Salar is a salt flat. And they've been there for decades. Albumarles contract goes until at least 2040 or 2042 right around there. SQM's phases out in 2030. So they had a bigger interest in this announcement. And so, actually, SQM has just made a deal with Kodelko, the state mining company, to essentially partner on developing other Solaris in the contract.

as well as fold in its operations in the Atacama. And so that's been closely watched by investors in Albumarl, of course, and others. So the government essentially is saying we want to develop more Solarz. We want to have a Chilean state-backed company partner with private entities in a minority role to produce lithium moving forward. And we want to go outside the Atacama. We want to go to other Solaris. So if you're looking at the broad global lithium market, what does that essentially mean?

that Chile wants to produce a lot more lithium. And they also want to do it with a novel technology known as direct lithium extraction, which has never actually worked on a commercial scale, but there's a lot of money being poured into it by researchers across the globe. DLE essentially wants to filter lithium from brine, sort of like how your household water softener would filter out heavy metals from your drinking water. Same concept. But lithium is a salt and salt corrode.

So there's a lot of complexity there. Yeah, I want to come back to DLE in a minute, but just staying on the geopolitics for a second. I mean, what's been interesting about that is so, you know, you read the announcement a couple years ago about Chile's going to nationalize its lithium market, and that feels super disruptive, and it feels like it's going to, I don't know, shut off supply or who knows what was going to happen to Abermoral on SQM as a result of that. Really what they were saying is that for any lithium project,

basically Kodelko, the state-owned mining company, which is mostly a copper mining company until now, has to own a majority. But it seems like that's kind of working out okay. so far, right? Like Abermaral and SQM are negotiating deals with Kidelko and they're going to develop new resources. I mean, am I reading the tea leaves wrong? It seems like it hasn't been super disruptive. Well, let's remember that Borich will not be running for re-election and his plan actually needs to get its way through the legislators in Chile, which it hasn't yet. But he has sort of stated his preference there and his goal. And as I mentioned, we've seen SQM make a deal. Album-Marles' deal goes

until, as I said, the 2040s. So what could happen in the future, I think, we're going to have to watch and wait and see. What we do know is that there's a lot of other companies that want to get into these other Solaris out there. So just yesterday, we saw Rio Tinto, one of the world's largest mining companies, said that it's very interested in jumping into Chile

and partnering with Cadalco there. Rio Tinto is also heavily invested in neighboring Argentina as well. So there's definitely a lot of interest in what Chile's potential is long-term, and these plans for President Borich have not necessarily scared away private investors. Okay, so that's the Chile component. Let's talk about the China component. I think there's two parts to this. There's obviously the refining part.

China is dominant in all battery metal refining, including lithium, as we discussed. And so there's been a push to build refining outside China, but as you said, it tends to be a little more expensive. And so as the prices crashed, that's been somewhat challenged. So I'm interested in sort of how strong you think China's stranglehold is on the refining side. And then the second bit is lithium production in the first place, because my understanding is China actually does want to ramp up lithium production, though it doesn't have the resources that are quite as plumb as what you see in Australia. Yeah, I'll take the second one first. So China has reserves of a type of source rock known as Lipitalite. So we were mentioning Spodumene earlier, and Australia has a lot of this.

Lipidolite would be another source rock for lithium. Producing lithium from lipidolite can be a little more, shall we say, environment. mentally questionable. And so many of these... Taxing. Yes. And so many of these facilities do tend to have some ESG-related concerns. The cost curve also tends to be a little bit higher.

And it's a little more opaque, the production data around what they're doing. What is sort of clear is that China is increasing production domestically from Lipidolite, and that is having an effect on obviously global supplies. It also has some of its mining companies operating in parts of Africa where they are mining hard rock and increasing supply there as well. So that's on the upstream or the extraction side. On the refining side, we've seen many Western companies and Chinese companies just continue to increase their refining capability there. A year or two ago, Alamara bought several more refining facilities inside mainland China to increase its processing there. And that was purely due to the huge just demand that is really taking shape across the whole country.

Have we seen, obviously, the inflation reduction act in the United States, the way it was designed, was sort of intended to try to move battery supply, EV battery supply chains outside China as much as possible, into the U.S. as much as possible. So there's like multiple components to this, and there's parts of it that are, you know, you get credit if you produce domestically. There's other parts you get credit if you produce. It was more designed to increase. sit in the United States rather than sort of punish China. I would sort of draw that distinction. That's interesting, though that may change now, depending on what happens in the new administration, I suppose. Correct, yes. Has it worked so far from what we could tell? Well, the legislation's been out for a little more than two years, and we have seen anecdotal evidence where some Western

miners are saying that, yes, some manufacturers are beginning to come to them more for deals to source these raw materials. A graphite is a great example. We're seeing some graphite miners in Quebec charge a premium for their graphite that's produced in North America to battery makers. Graphite is the largest metal by volume in an EV battery. It typically goes into anode, whereas lithium, which we've been talking about, goes into the cathode. And so right now China is the world's largest producer of graphite as well. And so if you've got a North American source of graphite and you've got a manufacturer that wants that EV tax credit tied to the IRA, we have seen graphite miners strike deals that are

actually at premiums. And that's obviously huge for the graphite industry, not necessarily great for the EV industry, which already is razor-thin margins. So where will that go moving forward? I think we're going to have to sort of see where that goes. With the IRA, we've seen a lot of money and with the IRA and related pieces of legislation. We've seen a lot of money be doled out to prospective U.S. lithium projects. There's two in Nevada that have gotten some recycling projects as well. those projects are still in development.

And so I think we'll see when they actually come online, how the entire market supports them. What we have seen from the incoming Trump administration is a desire to look at ways for industry to stand on its own two feet. So I don't know if we're going to see a lot more grants or loans from the IRA to industry out there, but could we see more things like tariffs

or sort of other trade-related steps taken to try to maybe level the playing field as, you know, as best they would try to do. I don't know. I mean, I think that would be an area to look at. But, you know, I mean, I think depending on how you look at the IRA, it has had a net benefit for some mining companies out there. I mean, one quick thing that I would say is that I think Republicans and Democrats look at the critical minerals issue with the same end goal in mind, but they sort of take two different paths to get there. Republicans tend to look at this issue from a national security lens, Democrats tend to try to look at it through a climate change lens. So if your goal is to affect climate change in a positive way,

then you're sort of less focused necessarily on where the critical minerals come from. But if your focus is on critical minerals through a national security lens and you want to make sure that the Pentagon or other government agencies have access to the critical minerals they need for the national defense, then you might approach it from a completely different lens, but you're still ending up at the same spot. Right. Okay, so let's wrap up by talking a little bit more about novel technologies. I mean, you mentioned direct lithium extraction.

That's probably the main one. You described what it is. Where are we in? There are lots of different versions of DLE, right? There's dozens of companies and all sorts of different technical approaches. Where are we in the development of direct lithium extraction technology from a commercial standpoint? Yeah, so I started writing about DLE in my day job like five years ago, and I remember my editor at the time was very kind and indulged me and said, sure, you can write about this space. And I said, trust me, this is going to be a big thing. And where we are today is that there's, as you say, Shale, there's been a lot of huge interest in this space, most recently from ExxonMobil, which has invested more than $100 million to try to extract lithium from a part of Arizona, excuse me, a part of Arkansas known as the smackover.

And this is a giant, essentially underground lake of brine that's filled with bromine and lithium and other metals. And companies have been extracting bromine from there for decades. So Exxon's plan essentially is, can we just stick another pipe in the ground and filter lithium out of that brine and then reinject it back underground? Now, Exxon's got obviously a lot of scientists at its disposal. It's got a huge R&D division. Exxon helped invent the lithium ion battery, you know, in the early 1980s. it obviously invests a lot in oil infrastructure and oil technology. So it feels like given that what it calls subsurface geological expertise,

that it should be able to crack this code. But there are many other companies trying to jump into this space as well. There's a lot of startups. There's a lot of government-backed scientists. We were talking about Chile earlier. President Borich has said he wants to phase out these large evaporation ponds and essentially have Chile only use direct lithium extraction. We'll see how that plan actually takes.

shape in the coming years. Coke Industries, huge investor in this space, Equinor, Occidental Petroleum. So a lot of oil companies as well are beginning to see the potential here to use DLE. But it's not, when we say DLE, we mean basically an umbrella of a lot of different technologies, as you were saying. So there's, gosh, at least four or five sort of more prominent ones at the top of my head. And we'll see who ends up going first. But what I would say here, DLE is not a magic bullet.

Just because somebody cracks the code somewhere does not necessarily mean that it's going to work elsewhere. Because each brine is different. When you think of a brine deposit, it can have a lot of lithium or can have a little bit amount of lithium. It could have a lot of magnesium and calcium and a lot of lithium as well. And so different deposits across the world have different concentrations. And that concentration is important because the technology that you have, the DLE technology that you select has to be tweaked for each brine. So just because it works in Arkansas,

doesn't mean it's going to work in Chile or Western China or parts of Germany. And so that, I think, has led to a lot of confusion, especially among retail investors, to just assume the first person to crack this code is going to be a billionaire with a house on the beach. That's not necessarily going to happen because each DLE is going to have to be personalized. And there's also some huge concerns around water. I mean, DLE requires a lot of water.

Mining in general requires a lot of water. So how do you encourage more water recycling? Should different jurisdictions have different rules for that? For instance, in Utah, we've seen the state legislature, pretty conservative state legislature, enact a rule last year that essentially block development of DLE on the Great Salt Lake. The Great Salt Lake is drying up. And so the state legislature is saying this is a huge tourist draw. This is a major impact on our state economy. The last thing we want is to take another step that could further its evaporation.

And so we saw a company actually pull out, a DLE company pull out of Utah and close its whole lithium division because of steps that the Utah legislature there took. So how will that affect the DLE implementation moving forward? You know, I think we're going to have to closely look at the regulatory front. Texas, for instance, has no rules right now governing lithium extraction, which I think people just assume, because Texas has a huge history in oil and gas extraction, that it would also have these lithium rules, but they haven't developed them yet. So the regular choice. And there's some interesting resource in Texas in the form of oil and gas wastewater. Yes. Right.

Like there's some folks trying to go after that, which isn't interesting. We haven't talked about that as a source. It's smaller potatoes, certainly, than what's like in Chile or in Arkansas. I mean, the term is PPM parts per million. I mean, in some cases in this produced water or this wastewater that goes alongside oil and gas extraction, we're talking about in the 10 to 100 parts per million. You know, in Chile, you could be a thousand or higher. And so what does that mean in principle?

That means you've got to filter a lot more volume in order to get the same amount of lithium. And so that increases your cost. On the flip side, if you are already extracting that, and it's already a cost center for you because you're paying to dispose of that wastewater, why not make it a profit center and try to get as much value out of that as you can? So that's sort of the philosophical question that's going on in the oil industry right now. And can DEOE help, you know, make a buck from that? All right, Ernest, we've walked through a whirlwind tour of the world of lithium.

I guess final question for you is just like, is there anything we should be looking out for over the next year, two years, major developments that would, I don't know, shake the foundation of the lithium market structure? Well, I think this is an industry that is, I would say, mining writ large. historically has been a very politically conservative industry. And what's very intriguing for me is that, at least in the United States, we've seen a lot of miners who are increasingly reliant on industrial policy out of Washington. We talked about the IRA and other pieces of legislation. And what's going on with the geopolitics, with Chinese-linked miners, flooding global markets with cheap supplies of lithium and nickel and cobalt and other critical minerals, I think increasingly what Washington does or doesn't do is going to have a huge effect on this industry.

in a way that the oil industry or the natural gas industry is not necessarily affected by industrial policy. So that's going to be a huge, huge area for everyone to focus on. And I think, especially after January 20th, we're going to have a lot more answers. All right, Ernest, thank you so much for the time. Hey, great to be with you, Shale. Ernest Scheider is the author of The War Below, Lithium, Copper, and the Global Battle to Power our lives. He's also a senior correspondent at Reuters. This show is a production of Latitude Media. You can head over Latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. Prelute Backs Visionaries, accelerating climate innovation that will reshape the global

economy for the betterment of people and planet. Learn more at preludeventures.com. This episode was produced by Daniel Waldorf, mixing by Roy Campanella and Sean Marquan, theme song by Sean Marquan. Stephen Lacey is our executive editor. I'm Shail Khan, and this is I want to ask you.