The Peter Zeihan Podcast Series - Lithium: The False Profit of Electrification || Peter Zeihan

Episode Date: November 20, 2023

Lithium has played an important role in the green transition and remains a crucial resource for the future of electricity; however, it's not going to be all sunshine and rainbows for lithium... Full Newsletter: https://mailchi.mp/zeihan/lithium-the-false-profit-of-electrification

Hey everybody, Peter Zinian here coming to you from just below 13,000 feet in the San Isbell National Forest in central Colorado. I am just below the saddle between Mount Sherman and Sheridan, which are a low 14er and a high 13er, both Centennial peaks here in Colorado. This area is rich with Colorado mining history dating back to the 1800s gold rush. So I thought today it might be a great time to talk about the new gold, and that would be lithium. Now, for those of you've been following me for a while, you know that lithium isn't great. It's not a fantastic battery chemistry. It's not particularly energy dense. It doesn't charge or discharge quickly.

It tends to swell and heat to the point that sometimes it catches on fire. And that means it's just not very good for things like transport where vibration and motion and temperature variation are just par for the day. But it is the best that we have. There's some promising things out there in labs, but nothing that's even close to prototype stage, whether it's vanadium batteries or flow batteries. We don't have anything else that we can produce. in volume to provide one one thousandth of one percent of the global vehicle fleet to ago EV except lithium. So for at least the next 15 years, it really is the only game in

town. I would love for that to be not true. And who knows, maybe we'll have some material science breakthroughs tomorrow. But even if we do, it's another 10 years before that's going to enter mass manufacturing. And that's assuming that we already have the input stream for whatever it happens to be. And that's kind of the problem with lithium. Now, lithium is produced in two ways. You can do your traditional mining, whether open pit or shaft, in order to get the rock,

pulverize it, you turn it to concentrate, turn to metal, or you get something called Spamante, which I'm sure I just butchered the pronunciation. I'm going to put the phonetics here for you.

Which you can then dissolve in an evaporation pond, throw in some acids and chemicals and everything, and it basically separates the lithium carbonate from the rest of the rock. And then you can turn that into concentrate. Now, there are two big players in global lithium that collectively produce about three quarters of everything we have.

The first country is Chile, where they produce it via that evaporation technique, high in the Apecoma desert, where the desert really helps with the evaporation. And unfortunately, their expansion plans have kind of stalled because they're in the process of trying to nationalize their industry. Now, overall, it'll probably be a good thing in the long run because it'll be a more compact, sustainable supply chain, closer to American and European consumers, less dependent on having to get processing done in China. These are all good things. But they don't happen for free and they don't happen for overnight. And Chile is a country with under 20 million people. So simply the labor in this very, very remote region is going to be a challenge for them. It's a 10 to 20 year

process. And that's 10 to 20 years where Chile's participation in lithium production is probably going to stall. Australia, primarily rock mining, is expanding as fast as they can. But rock mining takes a little bit longer to bring online than evaporation mining, or evaporation purification, I guess, would be a evaporation processing. There we go.

So you're not looking at the Australians probably being able to double their output within the next 10 years. Well, within the next 10 years, the world needs at least 18 times as much lithium. So lithium is going to go from the fuel source of the future to something that is a more precious commodity, which is going to shape everything in the electricity space.

And if we're going to try to electrify transport, shape everything in the transport space, too. There are no good solutions here. Right now, the majority of the world's processing capacity is in China, and we're going to lose all of that. And the secondary producers of lithium are only in the low single digits in terms of production. Russia's on that list. We're going to lose that, too. We will have some incidental sources coming online. For example, there is a sinew facilities in the United States, I believe a big one in Arizona coming online. But again, within 10 years, though you collectively are probably only going to be increasing overall supply by 20 to 30%.

The pipeline just isn't there. Even if we decided we wanted to throw a trillion dollars at this problem tomorrow, it still takes years to bring this stuff online. and mining is only the first step. Once you've got that concentrate, you then have to turn it into metal, and only then can you turn into chassis and battery systems, and that all needs to be built out too. And you guessed it,

a fair amount of that is in China already, and we're going to lose it all. So the smart play here remains a trillion dollars put into not lithium production, but physical science research so we can find a better battery chemistry, preferably two or three, so that we have a competition to see what the fuel of the future can be, instead of being stuck completely on one that we already know probably isn't going to work for us.

All right, that's it. See you from the top. Bye. I got a text through, so quick fact check. 47% of lithium right now comes from Australia. They've been expanding in leaps of bounds of the last decade. Chile has stalled out at 30%. Other than that, the rest of it holds. And one more add-on. Australia has negotiated their way.

into the Inflation Reduction Act. Remember, they have a free trade association with the United States, so they were able to join, and they will benefit from the subsidies for green tech that the Biden administration is established. That means the United States has preferential access to Australia and uranium, and especially lithium.

And as Australia's lithium industry expands, will be doing more and more processing, so this will eventually turn into lithium metals. It's still not enough for what the United States needs to do by like a factor of three or four. But with preferential access, it means the United States will face significantly fewer problems with the green transition so long as lithium is the fuel of choice, as long as that is the case. But if the United States takes the lion's share of Australia lithium, there really isn't anything left for anyone else.

So we are still in a world where the United States, because of its superior geography and financial position and alliance structure, can try to the green transition. Don't think it will go very well, but it can try. But partial success in the United States means a complete failure. earlier for the green transition everywhere else simply because of the lack of materials.