Everything you want to know about Lithium but were too afraid to ask
Crossing the river by feeling for the stones (Chinese Proverb)
China does not think like us.
For a start, in the UK, we generally tend not to formulate economic plans using high-flown poetic aphorisms. The last UK minister to indulge in the idea of vision rather than expediency was Secretary of State for Business, Vince Cable, during the period of the Coalition (2010-2015). His idea had been to liberate finance for growth in our economy from what he called ‘the three F’s’ – friends, families, and fools. In his case, it was not so much about picking winners, but identifying sectors where Britain already had a lead. Aerospace was one in which Britain appeared to be punching above its weight. With (at that time) 17% of the global aerospace market, Cable asked, 'What would the effect be on the British economy be if we could just raise that figure by 1%?'
What we weren’t so good at, was promoting how to get entirely new sectors to seed themselves.
During the catalytic leadership of Deng Xiao Ping in China of the mid-1980s, emerging from the shadow of Mao, the motto above, 'Crossing the river by feeling for the stones', distilled the leadership’s vision for taking informed risks, launching pilot-projects in a host of fields, and then backing to the hilt those that prospered.
It is a quote used by Lukasz Bednarski in his book entitled ‘Lithium – The Global Race for Battery Dominance and the New Energy Revolution’ (2021) and describes why China (not USA or Japan whose scientists were responsible for the invention of the lithium battery) became today’s world leader in the application of lithium in mass transit systems.
What’s amazing to anyone in the West is the thought that someone had a plan at all. Speaking only this week to a very senior manager at Hinckley Point C, to verify my idea of a lithium highway – one that might involve slinging a cable a few miles from the new nuclear reactor to the potential battery park across the estuary in Bridgwater, thus linking up lithium mines in Cornwall with battery-making in Somerset and vehicle-making in the Midlands, he said – ‘You must be joking. You’re talking about the British Government here!’
China, though, did have a plan – even if it was driven by a restless population wheezing and suffocating from airborne particulate emitted from coal-fired power stations. China acted because it had few doubts that a new form of mass non-fossil fuel energy storage was worth a try. China crossed the river, and feeling for the stones as it went, reached the other side with a lithium economy vertically integrated from mine to market.
It turns out though that, just like in the West, the seed relied on individuals with vision and stubbornness. The key lithium actors were eccentrics from the provinces, and not well connected to the communist party. One of them was Li Liangbin from Jiangxi, a chemical engineer who worked his way up via R&D and air-conditioning, and left a well-paid job to go into the ‘entrepreneurial unknown’. The family company he founded was Ganfeng Lithium and his personal net worth in 2019 was about $1.4 bln. The other heavyweight was Jiang Weiping from Sichuan whose net worth in 2019 was estimated as $1.8 billion. He is the founder of Tianqi.
Individuals were critical, but it was the weight of state support that made the difference. The key date in the story is 3rd March 1986 (86/3) when four Chinese physicists petitioned Deng Xiao Ping to adopt a ‘State High-Tech Development Plan’. It took Deng just two days to decide to back the scientists which, according to Bednarski, was the moment that spawned the developments in battery making which have made China a leader today. Although the aim was ‘to make China independent from economic reliance on foreign powers’, ironically China had to search outside its borders for the mining resources at the beginning of the supply chain. Ganfeng took its stake in the Greenbushes spodumene mines in Australia and Tianqi in the brines of SQM in Chile.
Today, it’s not just metal merchants who need to know about lithium. Any individual worried about how to mitigate their carbon footprint needs to know too.
It makes for interesting reading. Who, for example, would have thought that the first incarnation of lithium battery use in mass transit was its adoption by the bicycle industry? In UK in the early 1990s there just wouldn’t have been the population to try, but in Beijing - the bicycle capital of the world and inspiration for Katie Melua's song Nine Million Bicycles - the statistics from the cohort study was conclusive. It worked!
Bednarski, who is Polish, originally worked for Glencore in Poland as a trader but in an unusual direction of travel migrated the wrong way to market analysis. Today, he works for S&P Global advising companies on their energy transition and his masterwork was conceived and written during lockdown.
One thing that comes out strongly is how precarious is our dependence on the constantly moving tectonic plates of Chilean politics. It turns out that Pinochet’s son in law, Julio Ponce Lerou, is a central character in the story. He might be the most important shareholder in SQM today but under his father in law’s rule, it should be remembered it wasn’t just lithium but concentration camps that were sited in the Atacama. Meantime, there is the missed chance of Bolivia. So concerned was its indigenous leader, Evo Morales, for his country not to be exploited that despite the world’s largest reserves in the Salar de Uyuni almost no production takes place.
Anyone interested to learn why and how China still consumes more lithium Carbonate than Hydroxide, how much water it takes to extract 100mt of lithium carbonate from the high Atacama brines, which impurities need to be controlled to have good battery grade saleable quality, how Argentina’s brines are also being developed, and what will be the effect on the environment, will just have to read the book.
What will we do with our serious lithium opportunities in UK? We have the chance to integrate completely from mine to vehicle. The best we can say I suppose is that we’ll just fudge through.
By Anthony Lipmann
Published 18/07/23 www.lord-copper.com