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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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U.S. Forges First Link Of Lithium Supply Chain In West Africa

  • The Ewoyaa lithium project in Ghana is an important part in the nascent U.S. lithium supply chain.
  • Piedmont Lithium is currently preparing to break ground on a lithium refinery in Tennessee, with construction set to start in 2024 and first output expected in 2026.
  • Resource nationalism is a growing trend in the developing world as demand for resources, especially mining resources surges thanks to the transition push.
Lithium

Last year, the U.S. federal government began talking about building supply chains for the energy transition. Many saw this as a better-late-than-never moment after China had essentially cornered every transition-related market. Others saw it as an opportunity.

The Ewoyaa lithium project in Ghana is one example of how a company grabbed that opportunity. The first lithium mine in the Western African country is expected to become one of the first links in the nascent U.S. transition supply chain when it starts producing.

"Our investment in Ewoyaa will help alleviate potential future US supply constraints and provide crucial resources to help reduce America's dependence on foreign nations, like China," the chief executive of one of the companies involved told Bloomberg recently.

Piedmont Lithium is a supplier for Tesla and LG Chem, and it is currently preparing to break ground on a lithium refinery in Tennessee, with construction set to start in 2024 and first output expected in 2026, according to the company. The annual capacity of the refinery will be 30,000 metric tons of lithium hydroxide, which would triple the current lithium refining capacity of the United States.

Piedmont Lithium is also the second-largest shareholder of Australia-based Atlantic Lithium, which is leading the Ghana project. Both companies will take advantage of subsidies granted under the Inflation Reduction Act by the Biden administration.

"What the IRA does for me is it gives me certainty that 50% of my offtake is going into a hydroxide facility that's destined for incentivized battery conversion," the chief executive of Atlantic Lithium told Bloomberg, which this week published an article on the Ewoyaa project.

Meanwhile, China is home to over 50% of the world's lithium refining capacity. It also earlier this year cut the ribbon on a new lithium refinery in Zimbabwe, which is home to some of the most abundant lithium reserves and is the leader when it comes to reserves in Africa. Related: Is This The Moment Of Truth For The EV Industry?

The new facility will have an annual capacity of 450,000 tons of lithium concentrate, to be further refined in China. The reason China built the plant in Zimbabwe was that the southern African country passed a law banning the export of raw lithium ore in a bid to keep a bigger chunk of the supply chain at home.

This is a move Indonesia also made about a decade ago when it essentially mandated nickel miners active in the country to build processing facilities there instead of exporting the ore to their home countries or elsewhere to keep more of the business at home.

Ghana does not appear to have such legislation, but it might decide it is a good idea at some point: resource nationalism is a growing trend in the developing world as demand for resources, especially mining resources surges thanks to the transition push.

For now, however, the project is a win for U.S. EV ambitions, potentially. Given the latest developments in EV sales and manufacturing plans, these ambitions appear to be questionable.

The CEOs of some of the biggest carmakers in the world, including GM, Mercedes-Benz, and Ford are taking a step back on EVs and lowering their production targets because sales are turning out to be weaker than expected.

In a recent article, Business Insider summed up the change in sentiment demonstrated this earnings season by big automakers' chief executives, quoting GM's Mary Barra as saying, "As we get further into the transformation to EV, it's a bit bumpy."

The report also quoted the head of Mercedes-Benz, who was a lot blunter: This is a pretty brutal space," Harald Wilhelm said on its earnings call with analysts. "I can hardly imagine the current status quo is fully sustainable for everybody."

ADVERTISEMENT

A new lithium mine that is not controlled by Chinese companies sure sounds like a good idea from a U.S. perspective, especially with a 50% offtake ensured by the IRA. It's only too bad no amount of legislation can ensure demand for the EVs that lithium will be put in.

By Irina Slav for Oilprice.com

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