During Tesla’s earnings call, Musk confirmed that Tesla is building a lithium smelter in Texas.Musk has called lithium prices “ridiculously expensive” and has repeatedly encouraged entrepreneurs to develop lithium refining operations to alleviate bottlenecks in supplying key materials in lithium-ion batteries.
At a time when many automakers have been hit hard by the surge in lithium prices, Musk has taken the lead.
Following the close of the US stock market on Wednesday, Tesla announced third-quarter revenue, which was a record in a single quarter, but its gross profit margin was lower than expected. Automotive gross profit margin was less than 30% for two consecutive quarters. Tesla attributed this to rising raw materials, commodity prices, and rising logistics costs.
Musk and other executives agree that most commodities are decreasing, shipping is prohibitive, and the price of lithium batteries is not. Without any incentives, Tesla’s battery bill would likely reach $ 70 / kWh.
Asked about the progress of the latest 4680 battery technology development at the earnings claim, Tesla CEO Elon Musk confirmed that Tesla is building a lithium smelter in Texas, United States. Musk has called lithium prices “ridiculously expensive” and has repeatedly encouraged entrepreneurs to develop lithium refining operations to alleviate bottlenecks in supplying key materials in lithium-ion batteries.
Media had previously reported that Tesla had been considering the project for several months, but had previously considered another location in Louisiana. Tesla told regulators that he intends to build a battery plant near Corpus Christi to refine lithium hydroxide, turning the ore into a more suitable raw material.
The surge in global lithium prices
The world of statistics has listed on Twitter the average price per ton of lithium over the past 20 years. Global lithium prices have risen sharply since 2021; after the conflict between Russia and Ukraine, lithium prices accelerated.
Under this tweet, Musk replied:
Lithium prices have hit crazy highs! Unless costs increase, Tesla may actually have to move directly to large-scale (lithium) mining and refining.
Lithium prices rose more than 480% last year, according to Benchmark Mineral Intelligence. At the same time, the US Geological Survey stated that lithium mines exist in the United States. This also boosts Musk’s confidence in “doing it alone”.
Last month, Australian spodumene, a rock containing unrefined lithium, raised more than $ 7,700 per tonne at auction in sign of a lithium rush. That equates to a manufacturing cost of $ 74,000 per tonne of lithium carbonate, which would be a record, according to consulting firm Rystad.
According to media reports, Kevin Smith, chief executive of energy transition metals at commodity trader Traxys, said:
Competition is fierce and the supply side struggles to meet demand. This is not yet a market where supply and demand are balanced.
Driven by high lithium prices, some companies have launched lithium projects in Latin America and Australia. Latin America and Australia are the two largest lithium mining regions in the world. But analysts say it will take years for projects to go into full production and reduce supply shortages, in part because the South American government is seeking greater control over its natural resources.
What is missing is the technology, not the resources themselves, future demand will increase further
Indeed, lithium resources per se are not in short supply.The key constraint lies in refining high purity lithium and for batteries, particularly the speed of scale and supply chain of lithium refining. The lithium refining process converts industrial grade spodumene and lithium carbonate, then sells the lithium carbonate and lithium hydroxide for batteries to cathode manufacturers for sale.
Musk has repeatedly mentioned the limitations of this type of business on the development of the electric vehicle industry. He said in July:
Again, I would like to urge entrepreneurs to enter the lithium refining business.
Lithium is found almost everywhere, but it must be refined into lithium carbonate and lithium hydroxide for batteries, which require a high degree of purity. So getting into this business right now is like printing money to make money.
Musk believes lithium will still limit the development of the new energy vehicle industry in the short term.
Zeng Yuqun, president of CATL, also said that the price of lithium carbonate has skyrocketed in the short term this year, but reserves of mineral resources are plentiful. Currently, the real challenges of the industrial chain and enterprises arise from three aspects: the first is that consumers have higher requirements for research and development capabilities higher requirements. Since the beginning of this year, CATL has also been affected by the increase in commodity prices.
In the United States and elsewhere, traders and analysts expect demand for lithium to skyrocket in the coming years as the auto industry phased out internal combustion engines and launches electric vehicles. Companies like General Motors, Ford and Volkswagen are also investing billions of dollars in electric vehicle factories to catch up with Tesla.
More than 80 percent of lithium-ion batteries are used in electric vehicles, said Daisy Jennings-Gray, senior analyst at Benchmark Mineral Intelligence. The benchmark predicts that by 2030 this percentage will increase from 40% in 2015 to 90%.
