Lithium Sourcing in the US: Is DLE really the key to The Lithium Revolution?

The global transition to electric vehicles (EVs) and renewable energy storage systems has sparked an unprecedented demand for lithium. Its criticality has prompted nations and corporations to prioritize sourcing this critical resource. Despite its relative abundance in nature, traditional extraction modes require decades with negative environmental impacts. Direct lithium extraction (DLE) technology promises a much quicker and sustainable path

Lithium as the new oil

Lithium is integral to EV batteries due to its lightweight, high-energy density, and electrochemical properties, making it ideal for efficient energy storage. Though alternative technologies like sodium-ion and solid-state batteries are under development, lithium-ion batteries remain the most mature and viable technology, particularly for EVs.

Due to this, the demand for lithium is skyrocketing, as the adoption of EVs and battery energy storage devices continue to accelerate. According to the International Energy Agency (IEA), the demand for EV batteries reached more than 750 GWh in 2023, a 40% increase from 2022. This surge in demand is expected to continue, with projections indicating a potential tenfold increase in EV battery demand by 2035 in a net-zero emissions scenario. Lithium's critical role in this growth cannot be overstated. In 2023, battery demand for lithium stood at around 140 kt, accounting for 85% of total lithium demand and representing a 30% increase from the previous year. This trend is set to continue, with lithium demand projected to grow by 14 times by 2040 compared to 2020 levels. However, despite efforts to ramp up production, a significant supply gap is looming. According to a report by the Boston Consulting Group (BCG), lithium supply is expected to fall at least 4% short of demand by 2030, with this gap widening to 24% by 2035.

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The Push for Local Production and Extraction Challenges

As the demand for lithium grows, so does the need to expand production capabilities quickly and sustainably. This urgency is pushing countries to treat lithium as a critical resource, influencing new policies aimed at securing domestic supplies and reducing reliance on foreign sources. Traditional lithium extraction processes from hard rock, clay or brine deposits are capital-intensive and environmentally challenging, often involving water-intensive evaporation techniques that can take years to produce battery-grade lithium. The environmental impact and slow production timelines of traditional methods have spurred the need for faster, more sustainable alternatives, such as Direct Lithium Extraction (DLE).

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‍Direct Lithium Extraction (DLE): A Game Changer for Lithium Production

DLE technology represents a transformative approach to lithium extraction, using advanced filtration and ion-exchange methods to isolate lithium directly from brine. Unlike traditional extraction, which requires large evaporation ponds and extensive water use, DLE offers a more sustainable, efficient process that reduces environmental impact and expedites production.

Key advantages of DLE technology include:

• Reduced Water Usage: DLE significantly conserves water, a critical benefit in arid regions where brine resources are located.
• Accelerated Production: By eliminating the need for multi-year evaporation cycles, DLE can shorten production timelines, getting lithium to market faster.
• Lower Environmental Impact: DLE reduces land disruption and greenhouse gas emissions, making it an environmentally friendly alternative to traditional extraction methods​.

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According to a report by McKinsey, DLE could potentially unlock up to 80% of known lithium reserves that are currently uneconomical to extract using conventional methods.

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‍a.       Players and Projections‍

Several companies are at the forefront of developing and scaling DLE technology, each with unique approaches and projections. Despite these advancements, the anticipated increase in lithium production may not be sufficient to meet future demand. The Advanced Propulsion Centre predicts that a modest global lithium deficit is likely by 2025, which could significantly widen by 2030. These companies project that DLE could significantly increase lithium production in the coming years, potentially helping to alleviate the forecasted supply crunch.

             i.      EnergyX –Specializes in advanced filtration technologies and is partnering with industryplayers to scale its DLE operations.

             ii.      SLB (formerly Schlumberger) – Has successfully piloted a DLE process in Nevada, aimingfor an annual production of 10,000 metric tons of lithium by 2027.

             iii.     Standard Lithium – Collaborating with major corporations like ExxonMobil to scale DLE inArkansas, with a focus on oilfield brine resources.

             iv.     Lilac Solutions– Known for ion-exchange DLE technology, which they are deploying inpartnerships worldwide

These companies project that DLE could significantly increase lithium production in the coming years, potentially helping to alleviate the forecasted supply crunch.

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b. Challenges and Risks

Despite its promise, DLE is still a developing technology. Key challenges include:

• Supply Chain Development: DLE’s infrastructure requires a unique supply chain to support rapid scaling.
• Brine Variability: Brine composition varies across regions, which can affect extraction efficiency and require localized adjustments.
• High Initial Investment: Scaling up to commercial production involves significant capital investment, particularly for new entrants
• Permitting: The process of obtaining the necessary permits can be lengthy and complex. For instance, Piedmont Lithium's project in North Carolina faced years of delays before recently receiving a key mining permit.
• Community Relations: Local opposition to mining projects due to environmental concerns can significantly delay or even halt projects.
• Transportation and Logistics: Developing efficient supply chains from extraction sites to battery manufacturers remains a challenge.    
• Quality Control: Ensuring consistent, high-quality lithium production that meets the specific requirements of battery manufacturers is crucial.

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DLE could mitigate some of these challenges by reducing the need for extensive land use and water resources. The US Inflation Reduction Act (IRA) provides funding and incentives for developing domestic lithium production, including DLE projects.

The lithium battery value chain consists of five critical stages, each involving distinct stakeholders and processes. Raw lithium must progress through technical grade, battery grade, active material, battery manufacturing, and finally recycling phases. Producers, including miners and recyclers, initiate the process, while buyers range from large OEMs to commodity traders throughout the chain. Notably, all lithium must be converted to active material before becoming usable in batteries. China currently dominates the global lithium-ion manufacturing market, producing 77% of all batteries in 2020, while controlling 80% of raw material refining and 77% of cell capacity. Recyclers play a crucial role by potentially reintegrating materials back into the value chain at different points, creating a circular economy that helps address supply constraints and environmental concerns.

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Recommendations: Strategic Sourcing of Lithium

The lithium spot market poses challenges for companies seeking to secure a consistent supply of battery-grade lithium. With limited domestic processing capability, US-based companies often rely on intermediaries or seek multiple sources to ensure supply chain stability. Some EV makers are opting to go “upstream” and secure lithium resources directly from mines, reducing reliance on intermediaries. However, balancing single-source dependencies and multi-source redundancies is a complex aspect of lithium procurement strategies.

In the absence of a well-established ecosystem like in China, US companies must choose between:

1. Vertical Integration: building partnerships with lithium     mines. Some OEMs are moving upstream to secure lithium resources directly.
2. Multi-sourcing: exploring multi-sourcing     arrangements to meet their supply needs and ensure redundancy.
3. Tolling Agreements: Working with intermediaries     who can produce battery-grade lithium to various specifications.

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The near-constant need to innovate on battery chemistries and meet the growing demand means that institutions like the Battery Innovation Center (BIC) play a crucial role to support rapid development, testing, and commercialization. Particularly helpful for battery companies in the earlier stages of commercialization by helping to develop and test new battery chemistries, optimize lithium grades for specific cell designs, and improve battery management systems to work with various lithium grades. Such facilities provide a neutral ground for collaboration between different parts of the supply chain, without the potential conflicts of interest that might arise with government entities or for-profit institutions seeking to stake claims on company intellectual property.

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Conclusion

As the US seeks to establish a robust domestic battery supply chain, DLE technology presents a promising solution to increase lithium production while minimizing environmental impact. However, challenges remain in permitting, community acceptance, and establishing efficient supply chains. The projected supply gap underscores the urgency for innovative solutions and strategic investments across the supply chain to prevent potential disruptions in EV production. The race to establish sustainable and efficient lithium sources is on, and the success of DLE technologies could reshape the landscape of energy transition, making clean energy solutions more accessible and environmentally friendly than ever before.

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