top of page

Understanding global demand and supply to lithium

Lithium, the white gold has become the most desired resource in the world but is the supply enough to meet the growing demands?

Lithium fields in Salar de atacama, Chile.

As we see the colourful grids of lithium fields along the intersection between Chile, Argentina and Bolivia, also called the ‘Lithium Triangle’ in the Andes, there is a parallel reality of the rapidly drying up salt flats in the region. The popular notion dictates that lithium mining is primarily responsible for these dry salt flat lakes. However, with more scientific engagement, different facets of this story may come forward.

Chile is home to more than half of the world’s lithium resources and a question posed on the environmental sustainability of lithium extraction would have an enormous impact on the economy of the country as well. While it may be true that the extraction of this ‘white gold’ or lithium may have some impacts directly relating to water scarcity, the drying up of the salt lakes in Chile could have some more potential reasons to uncover. One of the most plausible reasons based on scientific evidence is that the increasing instances of drought over the period has a direct impact on the water loss in the salt lakes.

Speaking of the lithium resources, it must also be noted that the largest reserve of lithium in Chile is an absolutely arid and dry region of Salar de Atacama.

Salar de Atacama

This Chilean salt flat is responsible for a significant amount of lithium resources in the world and also occupies the status of the largest salt flat in the country. Salt flats are vast mineral rich pieces of land where the evaporation of water leads to minerals concentrated into thick lakers of salts. These lands are a valuable resource for countries that possess them.

Salar de Atacama in itself is a very dry arid land and therefore the water in the Chilean salt flat was a very scarce resource to begin with. Even though lithium mining forms a major activity within the region, it may not be solely responsible for the intense lack of water that the region is facing at the moment.

The reason for this assertion is that according to the latest report by the World Meteorological Department called the State of Climate in Latin America and the Caribbean, there is a situation of an ongoing drought in Chile, also called the ‘megadrought’ - as it started in 2010 and has remained consistent since then. This is corroborated even further through the data produced by National Aeronautics and Space Administration (NASA) that since 2010, the average rainfall in Chile has reduced by 25 per cent. On top of this there has been a recorded reduction in the moisture content of the soil.

Now, it may be established that the reduction in the climate conditions over time have led to these ‘megadroughts’ throughout the country. However, the drying up of the salt flats have posed questions to the viability of the country’s most important exported resource. The impact has been such that since 2021, the lithium exports by Chile have been about 50 times less than the export of other resources such as copper. As Chile may be losing ground to the extraction of lithium, other potential supplier candidates are coming up to be the part of the race.

All of this however points to the question of the importance of lithium in today’s world and the potential environmental impacts that it can have if exploited unsustainably.

The White Gold

The gateway to the world’s transition to reliance on renewable energy sources, lithium is often also called the lightest metal on Earth. This metal now forms an important part of the batteries that we use for our electronic goods and appliances on a day to day basis such as in mobile phones and automobiles. These rechargeable lithium-ion batteries form a major resource into the greater dependence on electrical energy. This metal is very reliable in terms of storage purposes as well. This paints a clear picture as to why this resource is in such high demand worldwide.

The benefit that lithium holds in the production of electronic goods also gives it the metal a high commercial value. Over the years many mainstream automobile manufacturers have been launching lithium-ion powered electric vehicles.

Now, a high demand subsequently translates to a high rate of extraction as well. lithium extraction has been taking place on a vast industrial scale over the past few years and various countries have started investing in identifying lithium rich resources within their territories. It is, however, important to consider what the future would look like for the lithium and electric vehicle industry.

Do the supplies match the demand?

Considering the valuable resource that it has come to be, the price of lithium has increased as much as three times in one year. This level of surge in prices is directly related to the increased demand coupled with a scarcity of supply.

Global lithium (Li) mines, deposits and occurrences map

Source: British Geological Survey

The metal is concentrated only in a few pockets over the world in the form of extractable brines and mineral ore deposits with Chile, Bolivia and Argentina occupying the majority of the reserves. This discrepancy further contributes to the rising prices of the mineral.

As per the recent survey of the lithium price index, the price of lithium carbonate in China soared up to $70 per kilogram from the price of last year which was $19 per kilogram. However, there seems to be a silver lining as the supply and demand seem to be congruent at least for the next year as the supply stood at 671,782 metric tons to a demand of 670,406 metric tons. Even though the future for the next few years does not particularly bleak, the supply shortage is likely to take place by 2030 and the prices might go even higher. This would have a direct impact on the electric vehicle industry which has just started to revolutionise the automobile sector.

One way to stabilise the price rise could be to diversify the resourcing activities of lithium. Countries such as the US have started to call for a greater strategic alliance to ensure the availability of the resource in the future. While the Brine based resources are developing in the US and China as well, there are mineral based lithium resources developing in Portugal, Germany, Spain as well as Zimbabwe, Namibia and Mali.

Even though greater attention is paid towards securing avenues for sustained lithium production, there is another angle to the issue. This pertains to the environmental impact that contentious mining could have in the long run.

Lithium mining and the environment

Any kind of mineral extraction from the Earth would have an adverse impact on the natural resources and the same is true for the impact that lithium has on the environment.

In order to be extracted, lithium is drilled from the salt flats and brought to the surface. In order to process the extracted lithium, toxic chemicals as well as a high amount of water is needed. As per reports,the production of one tonne of lithium uses about 2.2 million litres of water. This is exactly the reason why the shortage of water in lithium rich areas is directly linked to lithium extraction by environmentalists.

The resulting reduction in water has resulted in water related conflicts especially in the recognised lithium hotspot known as the ‘Lithium Triangle’. The water, already scarce, is very important for the livelihood of the local population and this is essentially diverted to the production of lithium in large amounts which further creates a human and environmental crisis.

However, the demand for the resource is so high that countries, even in the face of opposition by environmentalists, have sanctioned the extraction of lithium. One example of this remains Portugal that has resumed the mining activities even when faced by protests from the local population.

As the countries have started to look for potential untapped lithium resources within their territories, where does India stand in the race?

Lithium mining in India

It could be said that India is still in the process of identifying potential lithium resources, however earlier this year, one major headway was made in this regard through the discovery of lithium resources at a site in Karnataka. This has sparked increased interest in the mineral and also led the government to introduce amendments to certain policies regarding mineral extraction. There is a certain list of chemicals that may not be exploited or extracted by private companies however, under the proposed amendment lithium, beryllium and zirconium are likely to be removed from the list.

Lithium could prove to be an important potential resource for India in the future, however much will also depend on how the country would navigate the environmental risks attached to its continuous mining.


bottom of page