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Metal Miner

Metal Miner

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends,…

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Lithium Startups Seek Federal Aid As Traditional Funding Wanes

  • The drop in global lithium prices and uncertain macroeconomic factors have led corporate lithium buyers to reduce investments in startups.
  • Despite facing challenges, lithium startups play a crucial role in powering the shift to green energy and electrification.
  • The U.S. Department of Energy, with its massive electrification budget, is stepping in to fund promising lithium extraction initiatives.
Lithium

Via Metal Miner

 

For years, lithium startups have enjoyed easy funding. But as the global lithium price plummets, that all seems poised to change. Indeed, the aforementioned funds mainly stemmed from battery users hoping to secure a reliable source of lithium and venture capitalists looking to score big while helping close the gap on domestically produced lithium products. Until recently, many lithium buyers expected next-generation extraction technologies like direct lithium extraction (DLE) to come from startups. For that reason, these users demonstrated their commitment with massive funding.

For instance, in 2014, Tesla offered $325 million to Simbol Materials, a startup that had claimed to have developed extraordinary technology for extracting lithium from the Salton Sea in California. General Motors led a $50 million funding round for Texas startup EnergyX, which produces mobile trailers. The company ships these to extraction sites abroad, offering a simple, easy-to-follow process for refining the resulting lithium. And the list goes on.

Lithium Price, EV Demand Declines Causing Funding Shifts

More recently, an uncertain macroeconomic environment, higher interest rates, and a looming U.S. recession have pushed corporate lithium buyers away from investing in speculative startups. Put simply, U.S. automakers have more on their hands to deal with now than they did in years past. Tesla, for example, continues to grapple with reduced EV demand in the U.S. This prompted the automaker to announce the largest price cuts the U.S. market has seen for Tesla cars. Of course, it goes without saying that Ford, General Motors, and Stellantis have a lot on their hands at the moment.

That said, the issue is not black or white. Funding from large lithium buyers like the U.S. automakers continues to find its way to lithium startups, just at a greatly reduced pace. Because of this, the cash-hungry startups have begun to turn to Uncle Sam. In July, the U.S. Department of Energy announced major funding for startups working to achieve geothermal brine extraction. This is one of the many initiatives the agency plans to fund with its 2.8 billion dollar electrification budget, authorized by the Bipartisan Infrastructure Act of 2021.

It’s true that many startups feel shunned by lithium consumers entangled in their own woes. Still, lithium startups have historically played a significant role in lithium production. With adequate funding, they will continue to power the transition to green energy, which remains heavily reliant upon lithium. Lithium Americas, one of the biggest names in domestic lithium extraction today, came from humble beginnings. It was founded in 2009 as a junior exploration firm. Orocobre, a major player in extracting spodumene ore (an important lithium precursor) in Australia, was founded in 2007 at a similar scale.

The world’s shift to electrification paints a bright future for the many lithium startups competing to fuel tomorrow’s energy needs, even if today they need a helping hand from Big Brother.

By Daniel Julius

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