In this post, we outline the major applications of lithium to help give a backdrop for Lithium’s strong demand. Below is a breakdown of these applications, listed in order from highest to lowest usage
- Ceramics and glass: Heat resistant glass and glass ceramics use large amounts of Li, in aggregate. It reduces the melting temperature resulting in energy savings. Lithium allows for thinner, harder, and more even glazes and enamel.
- Batteries: Lithium batteries have high energy density, allowing them to store more energy per weight and volume. Demand in this category is driven by batteries used in electric vehicles and in the energy storage market.
- Lubricating greases: High temperature lubricating greases, used for aircraft engines and other applications, benefit from lithium high heat capacity.
- Air treatment: Lithium has the capacity to absorb 400 times its volume in carbon dioxide, which has opened applications for air treatment.
- Pharmaceuticals: It is used in pharmaceutical synthesis, as well as for the treatment of bipolar disorder
- Primary aluminum production: High strength-to-weight alloys found in aircrafts benefit from the fact that Li improves the melting behavior of aluminum oxide.
Of particular interest, and what has been driving demand for lithium over the last few years and will continue to drive demand going forward is the battery application. With climate change in full focus around the world, as well as increasing interest in protecting the environment, and access to more affordable technology, electric vehicles and alternative energy sources are being adopted at a rapid pace. We currently estimate battery applications to represent 30-35% of lithium demand, a number that will only grow as this becomes the dominant application for lithium.
Looking first at Electric Vehicles: Tesla has done an amazing job making them sexy and thus creating demand for the segment. Their success has led to an arms race among auto manufacturers striving to capture the new demand. Thus, regardless of how you see Tesla’s long term prospects, it is safe to say that the electric vehicle market will continue to grow. And at the heart of each electric vehicle is the Lithium ion battery. Additionally, with lithium ion batteries being a dominant battery technology for EV usage, and demand for EVs rapidly rising, scientific research is focusing on efficiency and cost reduction, and not so much on moving beyond lithium-ion batteries.
Similarly, energy storage is expected to grow rapidly as well, but from a substantially smaller base. Lithium ion batteries possess a few attributes that make them the ideal technology for energy storage: 1) They have one of the best energy-to-mass ratios- high energy density allows the batteries to pack in large amounts of energy into a small space. 2) They also have a very slow self-discharge rate when not in use (i.e., they hold onto stored energy).
Li-ion batteries would allow storage of the power generated from wind and solar farms. According to SQM, the #2 lithium producer in the world, large-scale energy storage systems adjacent to electricity substations will reduce the impact of variability implicit to energy supply/demand, and stabilize the grid during peak demand. In July 2016, Tesla began offering battery storage products which, when combined with their solar panel offerings, provide a comprehensive self-sustaining home energy production system to consumers. However, although this is a great step forward, it should be noted that the energy storage application for Li-ion batteries is still in the initial stages of development.
While we will continue to keep an eye on emerging lithium applications as they arrive, we can confidently say that with the lithium requirements for EVs and Energy Storage, these will be the dominant applications of the future, and the ones investors should keep a close eye on.