In recent years, the rapid advancement of electric vehicles, smartphones, and portable electronic devices has led to a significant surge in the demand for lithiumThis lightweight metal serves as the backbone of lithium batteries, which not only power countless devices but also support the ongoing development of the global economyThe penetration of lithium into everyday life is profound; it has become virtually impossible to escape a lifestyle that heavily relies on this abundant resource.

Every time you access your electric car, smartphone, or even a cordless hair razor, you are engaging with lithium batteries that are now ubiquitous in our modern technological landscape

The extent to which lithium has permeated daily routines underscores its significanceHowever, the past year has witnessed an alarming rise in lithium prices, especially in recent months, creating challenges for industries dependent on this crucial material.

As of January 4, the price for industrial-grade lithium carbonate skyrocketed from 165,000 yuan per ton in September to 274,000 yuanSimilarly, battery-grade lithium carbonate surged from 173,000 yuan to 290,000 yuan per ton, marking increases of 66% and 67.6% respectivelySuch price hikes have resulted in significant repercussions within the lithium battery production sector, leading to dropping stock prices, reduced production in downstream industries, and in some cases, delays in the supply of electric vehicles.

Market analysts have attributed the spike in lithium carbonate and hydroxide prices to several intertwined factors

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First, the pandemic has severely hampered the production expansion capabilities of upstream lithium mines, causing delays in lithium ore shipments from key suppliers like ChileConcurrently, downstream manufacturers have been ramping up their stockpiling efforts ahead of the Chinese New YearThe confluence of these factors, combined with speculative trading, has pushed lithium prices into an unprecedented territory.

The situation raises an essential question about the stability of lithium as a crucial component in China's renewable energy strategyWith comparisons being drawn to the tumultuous iron ore market, it begs the inquiry: will lithium face similar volatility?

Contrary to popular belief, China is not a country bereft of lithium resources; rather, it suffers from a lack of advanced extraction technologies

Although China possesses more than 13.5% of the world's proven lithium reserves, which parallely relates to its insufficient domestic extraction capabilitiesIn 2019, nearly 30,000 tons of lithium carbonate were imported, fulfilling 16.3% of China's lithium demand, predominantly sourced from Chile and Argentina.

This heavy dependence on imports is primarily driven by two factors: cost and technologyThe global lithium reserves are categorized mainly into two types: lithium-containing minerals and lithium-rich brine from salt lakesChina's lithium deposits are significantly represented by the latter form, with its most extensive salt lakes located in the Tibetan Plateau.

These high-altitude salt lakes, such as the vast Qaidam Basin, possess abundant lithium resources, accounting for over 85% of the total lithium reserves in China

However, the challenging ecological landscape and harsh environmental conditions prevalent in these regions present significant hurdles for efficient resource extraction.

In theory, tapping into these resource-rich salt lakes should provide a substantial supply of lithiumYet the geographical terrain complicates infrastructure development for power and water supplies, thereby greatly increasing the operational costs associated with lithium extraction from salt lakes.

Historically, this has left China in a predicamentOn the one hand, the country relies heavily on lithium ore, which comprises less than 20% of its total resource reserves, to satiate approximately 72% of its lithium production capacity

On the other hand, the majority of its lithium requirements must still be met through imports.

This challenge began to shift around 2010, whereupon the emergence of electric vehicles and advancements in lithium battery technology drew focus back to domestic resources and extraction methodsPioneering companies like BYD began to recognize the untapped potential of the lithium-rich salt flats hidden within the Tibetan Plateau.

BYD invested in the Zakuyue salt lake project in 2010, located 1,100 kilometers from Lhasa and at a high elevation of 4,400 metersIndustry experts have lauded this as a treasure trove of lithium, with this lake among the world's three largest lithium-rich salt lakes, not to mention its rich deposits of potassium, boron, rubidium, and cesium.

However, unforeseen complications arose from this venture; the intermingling of lithium and other abundant minerals in the lake's brine led to inconsistencies in the extraction technologies imported from abroad.

While these overseas methods were expected to yield results, the high concentrations of potassium, boron, magnesium, rubidium, and cesium—particularly with magnesium—present in the Zakuyue lake rendered the extraction process challenging

The result was a production plagued with impurities, which significantly disrupted the consistency and quality of the lithium products being produced.

A report for 2013 indicated that the revenue from lithium mining at Zakuyue reached nearly 10 million yuan, yet the profitability faltered at a mere 680,000 yuan, showcasing the difficulties faced by companies attempting to tap into this rich resource.

Additionally, BYD wasn’t alone; other ambitious firms like Tianqi Lithium and Salt Lake Lithium faced significant roadblocks as they struggled to refine their lithium extraction techniques to overcome technical challenges.

Faced with the high levels of magnesium and boron in Chinese salt lakes, it became increasingly apparent that developing a tailor-made lithium extraction technique suited to the unique conditions was crucial to transforming lithium bounty into value rather than relying on foreign technologies.

Since around 2010, scientists and industrial experts in China have engaged in a rigorous quest to address the world-class challenge of lithium separation under high magnesium and boron conditions unique to Chinese salt lakes.

However, this quest didn’t go smoothly

In 2014, a subsidiary of Salt Lake Lithium announced a breakthrough in “high magnesium and lithium separation” techniques, forecasting increased production of lithium chloride with industrial-grade purity levelsYet, practically implementing these breakthroughs proved to be a steep hill to climb.

By 2016, Tianqi Lithium also reported significant advancements in their lithium extraction technology from salt lakesHowever, despite these optimistic announcements, the actual ramp-up in production didn’t reach the levels necessary to meet burgeoning demand.

When lithium battery enterprises began testing domestic lithium salts, they quickly discovered that, despite notable improvements in purity, impurities still posed a significant problem affecting the overall quality of lithium batteries

The high purity achieved was undermined by inconsistencies that had direct repercussions on performance metrics.

With international battery technologies rapidly evolving from lithium iron phosphate toward more energy-dense lithium batteries, Chinese lithium manufacturers found themselves under constant pressure to enhance quality and keep pace with global developments.

This stark reality highlights a critical aspect of technological advancement; if hefty investments into R&D cannot keep pace with rapid industry evolution, the funds become sunk costs.

Moreover, the concerning drop in international lithium carbonate prices from 2013 to 2016, coupled with a protracted period of slow growth, exacerbated the challenges facing China’s salt lake lithium extraction efforts, leaving the whole sector teetering on instability.

Currently, the salt lake lithium extraction capabilities have yet to provide a steady supply to meet the demands for lithium batteries in China, especially for high-performance applications

As the domestic electric vehicle market grows vigorously, the demand for lithium resources has shot up, giving rise to concerns over supply insufficiency and the subsequent dependence on imports.

Whenever turbulence arises within the international lithium marketplace, or shipments from major suppliers like Chile and Argentina are delayed, prices balloon uncontrollably—a scenario that has left many stakeholders anxious.

At this juncture, many are left pondering: how long will the gap in China's lithium supply persist? Will the years invested in exploring salt lake lithium extraction technologies yield fruit, or are we on the precipice of another breakthrough?

It is evident that the prevailing mentality in China, particularly regarding the haste for technological advancements within the lithium sector, reflects unrealistic expectations

Many desire immediate fixes to complex industrial challenges.

There is an inclination towards seeking rapid returns: identifying a problem today, investing tomorrow, and expecting breakthroughs the next daySuch perspectives have led to skepticism surrounding investments that don’t yield results within a year or two and negativity toward ventures that take several years to show promise.

However, for the lithium extraction sector, the return on investment often takes a decade or moreCritical assessments of the long-term prospects of projects must consider this extended timeline.

From 2014 to 2016, after achieving technological breakthroughs in salt lake lithium extraction, China has not wavered in its dedication to improve extraction processes and expand production capacity, continually pushing for advancements from industrial-grade to battery-grade lithium raw materials.

In 2016, China produced 87,000 tons of lithium salts, with salt lake lithium accounting for 18,000 tons of that production

By 2020, these figures surged approximately to 240,000 tons, with 150,000 tons emanating from salt lake extractionThus, over four years, production from salt lakes increased by an impressive 730%, significantly boosting its market share.

While the current domestic production of battery-grade lithium carbonate remains predominantly reliant on lithium concentrates at 106,000 tons, the advancements in the salt lake extraction technology pave the way for it to replace a larger fraction of conventional lithium ore, potentially enhancing supply to battery-grade lithium carbonate more significantly.

Notably, as of 2019, prominent lithium producers like Salt Lake Co