US lithium supplies stuck in neutral

Davos is under way and even from Manhattan’s noisy West Village, you can just about hear the sound of worthy corporate sloganeering. Here’s hoping that, over the canapés, delegates can fix the climate, Ukraine, pestilence, and — my current personal beef — New Jersey transit.

You can also hear a noisy new dispute brewing, as EU leaders try to fight back against the US’s Inflation Reduction Act. To recap, Europeans and others have spent years calling on the US to take climate more seriously. Now that it has, they accuse the White House of protectionism because the sweeping climate legislation passed last year would try to reshore clean-energy supply chains in the US. As our colleagues in Europe report, the EU is about to loosen its own restrictions on subsidies to speed up more domestic clean energy investment. Take that, Biden.

It’s another sign of how the race to lead the energy transition could bring more global competition and deglobalisation. It may be the era’s defining trend. I’m doing a lot more reporting on it. Please share your thoughts on this issue with me at [email protected]

And read on for news of America’s efforts to speed up lithium production; a plea from Myles, who is heading back to West Texas next week; and today’s Data Drill on rising global liquefied natural gas demand.

Sputtering lithium sector threatens US electric vehicle goals

Lithium had a rollercoaster year. Prices doubled from record highs to end 2022 above $75,000 per tonne, underlining the worsening shortage of the material crucial for electric car batteries.

With demand for EVs soaring, the US is racing to secure supplies of the critical mineral: Joe Biden’s administration offered a loan of up to $700mn last week to Australian producer Ioneer for its undeveloped lithium mine and processing plant in Nevada.

The loan — the Department of Energy’s largest to date to the lithium sector — could fast-track development of the site. Ioneer plans to start production from the mine in 2026 and has contracts to supply Ford and Toyota with output. It could eventually turn out enough lithium for 370,000 EVs a year.

It is part of a wider Biden administration effort to secure supplies of metals such as lithium, cobalt, nickel and graphite that are crucial to the clean energy industries that Biden sees as key terrain for future economic competition with China. Analysts say it must happen much more quickly.

The Inflation Reduction Act’s full EV tax credits only go to cars that source components and raw materials from the US or free trade partner countries — a policy North American lithium executives have said is sorely needed to compete with Beijing.

Also last year, Biden invoked the Defense Production Act, a Korean war-era power, to boost domestic supply of battery metals, splurged $2.8bn for 20 companies working on EV battery supply chain projects in the US and entered into a pact to invest in critical mineral projects overseas with allies such as Canada, the EU, the UK and Australia.

Even with all of this government backing, the challenges to boost supply remain formidable. Projects in the west have suffered from lengthy permitting processes at a time when China is increasingly turning to laxer regulatory regimes in Africa and Latin America to secure feedstock for its vast lithium refineries at home.

Ioneer’s project is no exception. Concern over a rare wild flower — the Tiehm’s buckwheat — has slowed progress at its Nevada project and the loan will only be granted if the group passes environmental reviews.

The US has one operational lithium mine — and another proposed lithium mine in Nevada, Thacker Pass, has been opposed by conservation groups. A court ruling that could decide Thacker Pass’s fate is due early this year.

Elon Musk’s Tesla recently had to renegotiate a lithium supply deal with the miner Piedmont Lithium because a proposed mine in North Carolina has gotten bogged down in the regulatory thicket. The supply may come from Canada instead.

Some clean energy backers have argued that Congress needs to reform the way projects are evaluated and permitted to speed up new supplies.

Chris Berry, president of advisory House Mountain Partners, said the permitting decision for the Thacker Pass project will be a “real test case for how serious we are in the west about reconfiguring critical metals supply chains”.

A further issue is that the US lags not only behind China — which has 80 per cent of global lithium hydroxide processing capacity — but also Australia and Europe in its plans to build lithium refineries.

Tesla is among the companies eyeing new refining capacity, with plans for a possible investment of more than $350mn on lithium refinery along the US Gulf Coast, a major hub of the global oil refining business.

But Lukasz Bednarski, lithium analyst at S&P Global Commodity Insights, says the US’s refining capacity could be woefully short. It could be producing 362,000 tonnes of lithium carbonate equivalent by 2032 but have to ship 300,000 tonnes of it for processing overseas because of refinery shortages.

“The United States has little refining capacity and not enough is currently planned to process feedstock from the future North American lithium mines,” he said.

While lithium refineries take far less time to develop than mines, the biggest projects outside China have been facing significant delays and cost overruns, he says. And that could leave the US with a missing link — even if it can get domestic mining projects up and running. (Harry Dempsey)

End of the shale era?

Half a decade ago, $80 oil would have been more than enough for America’s oilfields to crank into mega-growth mode, expanding production at the dizzying rate that made the shale patch a juggernaut in the global market.

Today, despite prices sitting well above the long-term average, “drill, baby, drill” is not on the agenda.

The US shale revolution transformed energy geopolitics over the past 10 years. But evidence is mounting that it has run its course — not gone, but not about to grow with the same velocity either.

Derek and I took a dive into what is happening in the shale patch, and the repercussions for the world, in a Big Read over the weekend.

In a nutshell, though, shale’s inability to flood the market with crude the way it once did means that, in oil at least, the US has lost its edge. The old Opec-centric order is ascendant once more.

While shale is not going to swamp global markets, it is still growing. And the workers needed for the thousands of wells that will be drilled and fracked this year are in hot demand again.

Average earnings across the sector were just shy of $50 an hour in November — the latest data provided by the Bureau of Labor Statistics — up 15 per cent over the previous six months, and a hair’s breath from record levels. And by all reports, the rise shows no signs of letting up.

I will be spending some time in the Permian next week — in Hobbs, Midland and Odesa — reporting on the jobs boom. If you are around and free to chat please get in touch: [email protected] (Myles McCormick)

Data Drill

Global liquefied natural gas markets will remain tight into 2030 as demand for the fuel soars in Asia and Europe.

Asian demand for LNG will surpass 430mn tonnes by 2030, up 72 per cent from 2022, according to forecasts from Rystad Energy. Emerging markets in south and south-east Asia will lead this rise, with a tripling of consumption by the end of the decade.

Demand from Europe will reach 140mn tonnes by 2030, double the continent’s consumption in 2021, underscoring the break away from Russian supplies following Moscow’s invasion of Ukraine. The continent’s share of the global LNG market will peak at 30 per cent in 2023, before falling to 22 per cent by 2030.

About 71mn tonnes a year of LNG was sold under long-term contracts in 2022, the most of any year on record. Still, Rystad expects demand to regularly exceed supply throughout the decade, bringing a risk of punishingly high prices for consumers — unless producers can boost supply.

The US is expected to retain its place as the largest exporter of LNG, making up nearly a third of exports by 2030, according to Rystad. (Amanda Chu)

Power Points