Global Lithium Sector in America Holds Potential to Dominate Globally—Provided Its Expansion is Safeguarded
Energy Innovation Policy Analyst Jack Conness penned this piece.
On November 12, Exxon Mobil CEO Darren Woods made an unexpected move at the 2021 United Nations Climate Change Conference – he urged the Trump Administration to maintain their presence in the Paris Agreement and to slow down the dismantling of the Inflation Reduction Act (IRA). Despite being among the world's largest oil and gas producers, Exxon Mobil has started diversifying its energy investments to include crucial minerals needed for an electrified transportation future, like lithium.
Lithium's shining success in 2024 serves as a clear indication that the U.S. can thrive in the global clean energy market. However, the future of electric vehicle policies in the U.S. remains unclear, while the rest of the world continues to lower carbon emissions. The private sector is swiftly responding to the growing demand for zero-carbon technologies and materials, but seizing the initial momentum and transferring it into long-term success depends on a stable policy environment.
Progress reports on U.S. lithium reserves
The indicators pointed towards 2024 being the year for American lithium, and they were not wrong. Just a week after Woods' comments, Exxon Mobil announced a lithium supply deal with LG Chem – sending 100,000 tons of Arkansas lithium carbonate to LG Chem's Tennessee battery facility (LG Chem cites the IRA as a reason for investment). This came on the heels of a June lithium supply deal with battery maker SK On.
In October, the U.S. Geological Survey revealed that between 5 to 19 million tons of lithium resources are buried beneath southwestern Arkansas. If commercially recoverable, this would provide enough lithium to power over 9 million electric vehicle batteries per year, surpassing projected 2030 global demand. The most recent USGS assessment placed U.S. lithium resources at 14 million tons, so potentially doubling U.S. lithium resources to 28 million tons would make the U.S. home to nearly a quarter of the world's known lithium reserves.
The lithium train has left the station, thanks to the IRA
The U.S. lithium industry had a successful year in 2024. The Biden administration approved Ioneer’s Nevada lithium mine at Rhyolite, which will receive a $700 million loan from the Department of Energy to build an on-site lithium carbonate processing facility. Lithium Americas’ project at Thacker Pass in Nevada, originally approved by the Trump administration, secured a $2.26 billion loan in October to build their lithium carbonate processing facility, and finalized a $625 million deal with General Motors to supply lithium for their electric vehicles. Together, these two projects estimate they will process enough lithium for over 1 million EVs annually.
The U.S. Department of Treasury also clarified that extraction costs can qualify for the Advanced Manufacturing Production Credit (45X). Funding from the Bipartisan Infrastructure Law has allocated billions of dollars to lithium and other mineral extraction, processing, and recycling projects across the country. Albemarle shared plans to reopen their lithium mine in Kings Mountain, North Carolina, backed by the Department of Defense.
Uncertainties clouding the horizon
Even though 2024 was a landmark year for lithium, three potential pitfalls could threaten progress: prices, processes, and a potential return of the Trump administration.
First, the low lithium and battery prices have boosted global electric vehicle sales, but they discourage investments in the raw materials. This situation is troubling for an industry that currently lacks diversity and expects to grow 8x by 2040. Albemarle, the only major U.S. lithium producer, lost over $1 billion this year due to falling lithium prices and had to halt construction on their $1.3 billion processing facility in North Carolina. The lengthy process involved in planning, permitting, building, and operating mineral mines implies that they are less adaptable to shifting market prices than ever before.
Second, the methods for extracting lithium differ from mine to mine. For instance, Exxon Mobil's Arkansas lithium project is using Direct Lithium Extraction to extract lithium from the earth. Direct Lithium Extraction is touted for its efficiency, effectiveness, and reduced environmental footprint. However, its effectiveness remains unproven at commercial scale. While Direct Lithium Extraction may be the future of lithium extraction, this future has yet to be determined.
Lastly, a potential Trump administration return and the Republican-led 118 Congress could bring about significant changes. The impact of these changes on the future of domestic mineral mining and processing is uncertain. During the earlier years of the Trump administration, they initiated the development of the U.S. domestic mineral supply chain, including creating the country's first critical minerals list, release of a federal strategy report to ensure critical minerals availability, signing the Energy Act of 2020, and approving the Lithium Americas project in Nevada. Repealing legislation like the IRA could hinder the growth of this developing industry.
Lithium’s growth needs protection
In essence, 2024 proved to be a prosperous year for American lithium. It's increasingly apparent that the United States holds a valuable chance to capitalize on its natural resources, oversee the extraction and refining processes in an eco-friendly manner, and secure substantial financial gains as the globe shifts towards a clean energy-driven economy. However, the future of the industry in the U.S., particularly, remains uncertain – especially in the coming years.
The business strategy of Exxon Mobil, led by CEO Darren Woods, includes diversifying their energy investments to include lithium, a crucial mineral for an electrified transportation future. The energy innovations and policies in the U.S., such as the Inflation Reduction Act (IRA), play a significant role in attracting investments in the lithium sector.
