Most at issue for Tesla's next-gen lithium-ion chemistry are lithium and cobalt, each of which carries some degree of risk, though for very different reasons. Cobalt, a necessary ingredient for the current generation of nickel-cobalt-aluminum batteries powering Tesla's Model S, is something of a conflict mineral, with a large portion of the global supply originating in the oft-unstable Democratic Republic of Congo. But while the touch-and-go political situation there substantially influences the global price of cobalt, battery makers have an out. While a long-term spike in cobalt prices could cause short-term disruption in battery supply chains, manufacturers can adjust their battery chemistry to swap out cobalt for other materials, like manganese.
That workaround for a long-term surge in cobalt prices does not exist for lithium, an irreplaceable element in Tesla's current battery designs. Fortunately for Tesla, lithium isn't exactly in short supply, and the lithium exploration and production activity is picking up.
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"In terms of the actual production of these raw materials, we don't really have a concern for the supply of them," said Cosmin Laslau, an energy storage research analyst at Lux Research. "There will need to be some additional resources brought online, but as far as there being enough out there to support this, we think, 'Yes, yes there is.'"
In fact, there have been short-term oversupply concerns for companies in the business of producing lithium. A recent Goldman Sachs report estimates that Tesla may soak up as much as 17 percent of the current global supply of lithium when its Gigafactory is running at full capacity (15,000 to 25,000 tons of lithium carbonate annually), which would ease oversupply fears—a more conservative forecast from Bank of America put Tesla's lithium needs at 9,000 tons.
The current spot market price for lithium carbonate is between $5,000 and $6,000 per metric ton, according to Roskill, a U.K.-based metals market research company. The lithium price has been fairly stable in recent years, according to Roskill's managing director, Robert Baylis, though it has been rising on average 5 percent to 10 percent annually.
The global hunt for lithium
New lithium reserves are being discovered all the time. The majority of the world's lithium comes from Chile where companies including Sociedad Quimica y Minera and FMC LIthium (part of FMC Corp.) are the largest exporters. Australia is the world's second-biggest current lithium producer, but salt flats in Bolivia are thought to hold 6 million tons of untapped reserves, and a new deposit of lithium-rich brine discovered in Wyoming could hold another 18 million tons that have yet to be exploited.
"People are now looking for and finding sources of lithium all over the place," said Dan Hearsch, a battery and energy storage expert at consultancy AlixPartners LP. "Even with the expected growth of EVs, in this century there's really not a constraint. Even in the processing, it's not constrained, and it's not that expensive to process."
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That's because lithium isn't extracted via traditional mining (though it can be) but rather through an electrolytic process that separates lithium salts from brine pools and brine deposits, a flexible and scalable process that requires a fraction of the sunk costs associated with traditional mining.