Tuesday, September 25, 2012

The importance of lithium future, globalization and geopolitical dynamics

Commodities or raw materials like metals, chemicals, grains, etc. are not always appreciated by us, as consumers, because we don't necessary use as a finished product. However, a small change in the market or supply of this commodities may impact greatly over the final consumer. Two or three classes ago, it was explained to us the bullwhip effect but related to demand forecasting but I think this is a good example of how that could happen also from a supply perspective. 

So in this particular case, if lithium supply is not flowing right, prices in our so needed electronic devices may become more expensive. Furthermore, if its inaccessible for political reasons maybe the batteries of our things will become heavier because will be produced from another material. So this example, paints the picture of the supply chain network from the very first material and the bullwhip effect that may cost to the finished good and particularly explains how  geopolitical dynamics affects the distribution of lithium supplies.

Study outlines supply chain challenges for lithium future

September 24, 2012

As demand increases for lithium, the essential element in batteries for everything from cameras to automobiles, a researcher at Missouri University of Science and Technology is studying potential disruptions to the long-term supply chain the world's lightest metal. 

Although the current dominant battery type for hybrid electric vehicles is nickel metal hydride, lithium-ion battery technology is considered by many to be the "power source of choice for sustainable transport," says Ona Egbue, a doctoral student in engineering management. 

"Lithium batteries are top choices for high-performance rechargeable battery packs," Egbue says. "Batteries make up 23 percent of lithium use and are the fastest growing end use of lithium.

" With nearly a dozen different kinds of electric vehicles on U.S. roads this year, more drivers are getting behind the wheel of vehicles powered by advanced lithium power packs. 

Therefore, The U.S. is a major importer of lithium. The majority of known lithium reserves are located in China, Chile, Argentina and Australia. Together these regions were also responsible for more than 90 percent of all lithium production in 2010, not including U.S. production. 

"More than 90 percent of lithium reserves - what is economically feasible to extract - are in just four countries," Egbue says. "The geopolitical dynamics of this distribution of lithium supplies has largely been ignored." 

Due to political instability, there is a question of U.S. access to materials produced in Bolivia, which holds the world's largest lithium resource and has new production projects in the pipeline, she says. 

"The diplomatic relationships between the U.S. and Bolivia had deteriorated during the Evo Morales administration, leading to the dismantling of key partnerships," Egbue adds. 

In addition, the emergence of lithium as a strategic resource and the associated geopolitics is troubling, she says. 

"As China has demonstrated in recent years with rare-earth elements, a major raw material for nickel-metal hydride batteries, a country that supplies a resource can greatly affect the country that receives the resource," Egbue says. "China, which controls more than 95 percent of global rare-earth elements supply, recently made a decision to restrict its export quota of this raw material, causing a significant increase in prices. This action by China highlights the risks of global dependence." 

Egbue has developed a supply chain model for lithium that demonstrates the connection between supply and demand and provides a framework with which to investigate the technical, geopolitical and economic factors that could potentially impact the supply of lithium for electric vehicles. Provided by Missouri University of Science and Technology.

Read more at: http://phys.org/news/2012-09-outlines-chain-lithium-future.html#jCp

I guess is not just about who has the lithium but also who has the technology and the know-how of how to extract rare-earth elements, specifications of how to transport and handle it. Would it be more convenient to American Companies to invest in extraction and logistic technology in friendly countries with important lithium reserves or to invest in R&D to develop batteries that need materials that are not conflicted by geopolitical reasons?

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