Lithium’s highs and lows – and what they mean for the Gulf

Reuters

• Metal’s price fell 80% in a year
• Saudi seawater extraction plan
• Batteries part of transition strategies

For one of the world’s most critical minerals, the past two years have been the best of times and the worst of times.

First, lithium prices shot skywards, hitting around $80,000 per metric tonne in 2022 amid fears that global supply would not meet demand.

Then, in just a year, the soft, silvery-white metal lost more than 80 percent of its value. In January 2024, lithium – widely viewed as central to the energy transition because of its widespread use in batteries – was trading at a low of $13,200 a tonne.

---

---

The overshoot was primarily driven by demand and supply in China, the world’s biggest lithium market, as well as disappointing demand for electric vehicles (EVs) worldwide.

The fluctuations have implications for the Gulf, where the region’s two economic giants – Saudi Arabia and the UAE – are engaged in EV development and seeking ways to produce lithium of their own. 

Raw lithium is used primarily in battery manufacture and is extracted via two processes: mining of metal-bearing rocks – which accounted for about 57 percent of global supply in 2023 – and distillation from brine, which accounted for the rest. 

Lithium is one of the most abundant metals on Earth because of its presence in salt water, explains Martin Jackson, head of battery raw materials at metals and mining analyst CRU. 

“The difficulty is all in extracting it,” Jackson tells AGBI.

Most of that extraction is done in Australia and Chile. The former accounts for just under half of global production and the latter around a quarter. 

Two companies are dominant in the industry – Chile’s SQM and US business Albemarle. In 2023, each commanded about 20 percent of global supply.

• Abu Dhabi plans lithium plant to support EV growth
• Saudi and Morocco vie for lead in Mena EV race
• Maaden working to extract lithium from seawater

In terms of consumption, China accounted for 63 percent of the global total in 2023. Much of this goes to its EV industry. This year six of every 10 EVs sold worldwide will be sold in China, BloombergNEF has predicted. 

While Beijing produces some of its own lithium, it has also invested heavily in production elsewhere. 

Chinese companies are majority stakeholders in the world’s largest lithium mine, Greenbushes in Australia. They also own major stakes in operations in Chile, Canada and in new providers such as Zimbabwe. 

This new provision poses a challenge, however. Supply has jumped over the past few years as producers scaled up to meet an expected surge in demand. But the surge has so far failed to materialise. 

“Supply went up at twice the rate of demand last year,” Jackson says. 

Sluggish growth in the Chinese economy and lower-than-expected EV sales have left a lithium glut – and hammered prices.

Given this oversupply, plans for production in the Gulf may seem ill-timed. 

Reuters

In October last year, Saudi mining company Ma’aden announced a pilot project to extract lithium from seawater, in cooperation with King Abdullah University of Science and Technology Innovation Ventures Fund.

Seawater has low concentrations of metal and large amounts of energy are needed to maximise extraction.

That may not be a problem in energy-rich Saudi Arabia, but a potentially more lucrative source of lithium could be the brine used to flush out crude from ageing oil wells. 

Pilot lithium extraction projects

Reuters reported in March that Saudi Arabia’s Aramco and the UAE’s Adnoc would be investing in an oil well brine extraction project. 

In this, they are following oil companies elsewhere, which are seeking returns on old assets and entering the minerals business. 

Pilot projects are currently underway in the US and Canada. This would be good news for Saudi Arabia and the UAE, where domestic lithium and lithium battery production tie into diversification and energy transition plans.

“There is the thought that if we have to be the last players in oil, we should use some of that funding to go beyond the internal combustion engine,” says Jennifer Gnana, Saudi Arabia correspondent for S&P Global Commodity Insights.

“This lithium extraction plan is part of a wider search for minerals useful to this strategy.

“Both Saudi Arabia and the UAE are very supportive of R&D and want to localise a lot of the technology they need.” 

EV Metals Group is developing a plant in Yanbu, Saudi Arabia, where Lucid Motors opened its first EV manufacturing plant last September. 

Ceer, a Saudi domestic EV producer, is also building a plant in the kingdom and Hyundai is set to follow suit.

Meanwhile, Lepidico is shipping lithium concentrate from Namibia to Abu Dhabi’s Kezad industrial park for conversion into battery-grade product. 

NWTN is the UAE’s domestic EV manufacturer and electric cars are part of the country’s “Operation 300 Billion” 10-year industrial development strategy.

As the EV market matures, price fluctuations should become less extreme, according to the analysts, and battery – and therefore lithium – demand is likely to strengthen. 

“The region has a lot of access to renewable energy and low-cost fossil fuels, supporting the ambition of building a battery supply chain,” Jackson says. “The opportunity is certainly there.”