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A grassy plain in Nevada’s Humboldt County is where the contest between the U.S. and China for mastery of the global economy could be won or lost.

Called Thacker Pass, the empty patch of land, 230 miles from Reno, looks decidedly uninteresting, home to little more than scrubby bushes. But it’s what lies beneath that places the site at the center of the twenty-first century economy: Lithium.

That once-obscure metal, long suffering in the shadow of copper, iron ore and other widely cherished commodities, has now claimed the global spotlight. The challenge of climate change has elevated lithium into the indispensable ingredient for the green energy age. As all the world’s major economies push aggressively to electrify their transportation, lithium — and the batteries made with it — will power that revolution. 

But here’s the problem: There won’t be enough lithium to go around, at least in the near term. The U.S., for instance, produces hardly any — less than 1 percent of the world’s output. Only a single lithium mine — located about 300 miles south of Thacker Pass, in Silver Peak, Nevada — is currently operating within the United States. 

That makes Thacker Pass’s treasure trove of lithium as good as gold. With a $1 billion investment, Lithium Americas, the New York Stock Exchange-listed company developing the site, hopes to transform that grassy space into a lithium mine and processing facility. Construction is expected to begin next year. The goal: Churn out the lithium for what will be a burgeoning battery and electric-vehicle supply chain in the United States.

“There is a realization among companies that you have to have more localized control” of critical supply, says Jonathan Evans, Lithium Americas’ chief executive officer. “The ball is already rolling.”

Rolling, yes, but from behind. While the U.S. is only now beginning to construct an electric vehicle industry, its chief rival already has one firmly in place — including for lithium. China processes two-thirds of the world’s lithium, according to research firm Benchmark Mineral Intelligence. Not only do these refiners fuel China’s own, gargantuan electric-vehicle sector, but others’ as well. Chinese-processed lithium is crucial for the world’s top battery manufacturers in Japan and South Korea, key partners in America’s plans for EV greatness. Even Tesla uses Chinese lithium. Elon Musk’s company inked a five-year deal with Sichuan-based lithium producer Yahua Industrial Group in December, worth as much as $880 million.

In the days when globalization was stretching supply chains around the planet and, inevitably in many cases, through the Chinese economy, the route lithium took to get to the U.S. was of little consequence. But the world has changed, and the lithium industry is changing with it. At a time when the U.S. and China are becoming more competitors than compatriots, the transformation to new forms of energy has tipped off a contest between the world’s two most influential nations over which one of them will occupy the clean energy driver’s seat. Beijing has crowned the development of electric vehicles as a major policy priority for more than a decade — with the lithium industry to back that up. The administration of President Joe Biden is eager to catch up, and though the initial $174 billion he earmarked to support an electric-vehicle sector in his initial infrastructure bill has been severely whittled down by Republicans in Congress, American automakers are speeding into a battery powered future on their own. Ford is producing more electric Mustangs this year than gasoline versions of the iconic car.

That’s brought lithium — and who has it — to the forefront of the global economy. As policymakers and business leaders in both the U.S. and China rev up electric-vehicle production, they find themselves in the unenviable position of being reliant on the insecure supply of a raw material critical to both countries’ economies. And, at least over the next few years, there may not be enough lithium available to support their grand plans. A battery factory can get built in a couple years; a lithium mine takes at least five to seven, sometimes even longer. Many current projects are a long way from producing anything. Industry experts expect a shortage of lithium to last for years. Benchmark Mineral Intelligence forecasts a small shortfall will emerge in 2021, and swell by more than 20 times by 2025.

“You can’t turn on a dime,” says Lithium Americas’ Evans. “This is a multi-year process. The lagging asset will be the critical minerals for all this.”

The unfortunate result could be global competition for lithium, with each major economic power grasping to ensure supply. “There’s going to be a scramble for sure,” says Keith Phillips, chief executive officer of Piedmont Lithium, headquartered in Belmont, North Carolina. “You’re at the early stages of starting to see it.”

Phillips is another businessman trying to fill the lithium void. Piedmont’s 2,700-acre site, 25 miles west of Charlotte, N.C. is scheduled to break ground in early 2022 on a mine and processing plants — an investment of $638 million. Phillips’s plan is to feed Piedmont’s lithium to American carmakers going electric. 

They’ll definitely need it. General Motors has pledged to produce only electric cars by 2035. Yet meeting such lofty goals — not just in the U.S. but all around the world — could all hinge on a pasty, white metal. Whatever ambitious aims governments and chief executives dream up, and however much cash they devote to meeting them, the pace of electric change may, in the end, proceed no more quickly than the flow of lithium can sustain.

“It’s a little bit like an arms race,” says George Miller, analyst at Benchmark Mineral Intelligence. “China, the U.S. and Europe are racing each other to be the dominant site of raw material, processing and electric-vehicle manufacturing because they want to capture as much value on that automotive supply chain as possible.”

PERIODIC TABLE PERSISTENCE      

The world has often been shaped by what nature has given us, albeit in finite quantities. Spanish conquistadors overran the indigenous empires of the New World in a frantic quest for silver and gold. The Portuguese heralded the rise of the West with their seafaring search for spices. Many of the fateful entanglements Washington has faced in the modern Middle East are rooted in the need for oil.      

We’d like to think our civilization has progressed beyond these contests for raw materials — that what we siphon from the earth or pluck off trees doesn’t determine the fate of nations. Now, the future is in the hands of university scientists and Silicon Valley programmers. New energy holds out the promise that we will not only save the planet from destructive warming, but also free ourselves of the geopolitical burdens long caused by fossil fuels.

Yet even in the digital age, we can’t escape the periodic table. The adoption of new forms of energy — and the outcome of the international battle to dominate its technology and production — will still, in part, be determined by what we can dig out of the ground. Rather than ending global competition over natural resources, the transition to green energy may simply redirect it, as a fresh batch of raw materials become the arbiters of world power. As Paul Lloyd, managing director of Hawkstone Mining, put it: “Lithium potentially is the next oil.”

Hopefully, we won’t be shooting at each other over lithium mines. But in a sense, we already are: Governments in the world’s major economic centers are seeking to build secure supply chains for green energy products — from autonomous-driving electric sedans to the raw materials inside of them. Way down at the bottom of that chain is raw lithium — extracted from rock or brine — and the factories to process it for use in electric-vehicle batteries. In an executive order signed in February, President Biden launched a review of the country’s sourcing of critical materials and components, specifically mentioning those for electric-vehicle batteries. The U.S., the order asserted, “needs resilient, diverse, and secure supply chains to ensure our economic prosperity and national security.”

Some argue these supply chains should also be more local. Piedmont’s Phillips calls the current system — in which lithium, for example, is dug up in Australia or Latin America, processed in China, then shipped off to Japan before ever reaching the U.S. — “the least sustainable model.” Any disruptions along the route — from bad storms to unfriendly governments to, as we’ve recently learned, global pandemics — could starve U.S. industry of the critical metal.      

“If people with strong positions in the supply chain wanted to exercise their influence in a harmful way, that’s a problem,” says Phillips. “It’s a problem from a national security perspective. It’s also a problem if you’re Ford and you’re trying to sell cars. There is a real focus on more localized supply for all the right reasons.”

What’s happening in lithium is a reversal of that great trend of East-West globalization, tipped off by Portuguese clove traders five centuries ago. Proponents like Phillips envision automakers in the U.S. producing electric cars with batteries made in the U.S. with lithium mined and refined in the U.S. — a tight supply system that promises stability and saves money. 

But what nature provides, it can also restrict, and that means there is only so far a process of deglobalization can go in the world of lithium. Though there is no dearth of lithium — there’s a lot of it waiting to be unearthed around the world — it is still highly unlikely that the U.S. or any major economic center will ever be self-sufficient. To a degree, then, the U.S. and everyone else will remain reliant on other countries.      

“You will have some local supply,” says Alice Yu, analyst at S&P Global Market Intelligence in Beijing. But, she adds, “the majority of lithium will still be mined where it is most economical.”

Hawkstone’s Lloyd foresees the emergence of lithium zones, with supply chains not entirely local, but significantly tightened up. One would center on the U.S. and stretch into Canada and Latin America; a second on Europe, reaching into Africa; and a third retaining the Australia-to-China linkages that today form the backbone of the sector.

Of course, in a globalized world, what’s “local” can be hard to define. For instance, Lloyd’s Hawkstone is headquartered in Perth, Australia, and developing a project in Arizona known as Big Sandy. While Albemarle, a Charlotte-based company that operates the sole U.S. mine, is one of the largest producers of the stuff in the world, with assets in Chile and Australia. It’s even hard to disentangle American versus Chinese lithium. Lithium Americas controls Thacker Pass, but it is based in Vancouver and has China’s Ganfeng Lithium, one of the largest companies in the sector, as a significant shareholder. (Lithium Americas says Ganfeng does not have rights to Thacker Pass lithium supply.) One of Albemarle’s partners in the Greenbuses lithium mine in Western Australia, the world’s largest, is a Chinese company, Tianqi.

There is no way that we can look at picking up Chinese money… We want to fund our project in the U.S… [American leaders] don’t want the Chinese to control U.S.-based projects.

Paul Lloyd, managing director of Hawkstone Mining

Nevertheless, the geopolitical competition between the U.S. and China — already the source of a trade war, a tech war, and a media war — may be tipping off a lithium war, too. There is an effort underway in the U.S. to protect, at least in part, its lithium supply chain from Chinese intrusion. Lloyd, who is in the process of changing his company’s name from Hawkstone to Arizona Lithium to better reflect the business, says he is steering clear of China. 

“There is no way that we can look at picking up Chinese money,” he says. “We want to fund our project in the U.S.” American leaders, he notes, “don’t want the Chinese to control U.S.-based projects.”

REDRAWING THE LITHIUM MAP

On the surface, it seems China has an immense advantage. The country already has a grip on the entire lithium-ion battery supply chain: it controls 80 percent of the world’s raw material refining (not just lithium, but also nickel, cobalt, manganese and graphite), 77 percent of the cell capacity and 60 percent of the component manufacturing, according to research outfit BloombergNEF. 

Benchmark’s Miller calls China’s grip on lithium processing “pretty incredible,” adding: “To see such a focus of chemical processing capacity in one country very much speaks to China’s desire to dominate that supply chain.” 

However, China is hardly invulnerable: The country’s domestic lithium production is no more than 15 percent of the world’s total. Worse still, China’s local resources are considered low grade and high cost.

That leaves China’s ambitions to dominate the electric-vehicle business dependent on the outside world. And with the U.S. and Europe eager to lock in their own supply, China could find itself in a weaker situation than it at first appears, intent on defending its edge, but potentially lacking the lithium to do so.

“They’ll be wanting to protect that moving forward,” says Ryan Parkin, chief executive officer of Australia-based Infinity Lithium, which is pursuing a mining and processing project in Spain, “but there is only so much lithium that’s going to be made available to China moving forward. So it’s a real arms race at the moment to determine who is going to control these raw materials.”

Fully aware of this deficiency, Chinese firms have searched the planet for lithium, often investing in or partnering with other companies. Ganfeng Lithium, which is based in Jiangxi Province, is jointly developing a project in Argentina with Lithium Americas. Ganfeng is also looking to acquire full ownership of Bacanora Lithium, which has a lithium project in Mexico.

“They’ve been doing this for the past 10 years,” says Kwasi Ampofo, head of metals and mining research at BloombergNEF. “It’s just that the world was not watching.”

Still, China’s immense electric-vehicle industry remains uncomfortably reliant on one supplier: Australia. Much of the lithium processed in China comes from mines in the mining mecca of Western Australia. The relationship has long been a happy, symbiotic one: The Australians are exceptionally efficient at mining, and the Chinese are equally efficient in refining. 

That is, until relations between the two governments descended into a deep freeze, with each taking economic potshots at one another. Canberra has already banned telecom equipment from Chinese giant Huawei Technologies from its 5G networks and canceled two Belt and Road Initiative agreements. Though the Australians have not curtailed China’s access to lithium, they are looking to redirect it. Rather than simply shipping off valuable raw materials like lithium to China, the government is promoting a plan to nurture more local processing of and manufacturing with the country’s stash of green-energy metals — a potential new source of supply the U.S. and its allies are sure to welcome. If relations with Australia go further south, China could be in trouble.

Still, whatever the vulnerabilities in China’s lithium industry, its huge head start may hold for some time. “China is really accelerating at full pace,” says Benchmark’s Miller. “I don’t see Chinese dominance subsiding over the next decade really at all.”

Over time, however, and especially as competition in electric vehicles heats up, China’s preeminence will inevitably decline. BloombergNEF foresees that though China will still be the dominant player in lithium battery supply chains in 2025, other countries will begin to catch up, including the United States. The result will be the redrawing of the lithium map, with new sources of supply feeding entirely new industrial centers.      

“There is that risk of countries trying to get their hands on the same supply chains,” says BloombergNEF’s Ampofo, but “there is enough to meet everyone’s demand. That will diversify the global supply chain and not concentrate it in one jurisdiction.”

The message, though, is clear: In a world on the cusp of a new epoch of energy, the geopolitical calculations that often weighed on the old-energy age may morph, but not vanish. The Americans “have to go hard now,” on lithium, says Hawkstone’s Lloyd, “otherwise they will be left behind.”

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