Earlier this month, the U.S. Department of Energy announced a record conditional loan of $2.26 billion to tap the largest known lithium reserves in North America. The loan is an important step in an effort by the U.S. government to reduce reliance on China for the metal used to make batteries.
Analysts, however, say that it may be too late to move away from reliance on China completely when it comes to metal processing and the production of batteries.
The DOE’s Loan Programs Office (LPO) says the funds, if approved after review, will help the Lithium Americas Corp. construct a lithium carbonate processing plant at the Thacker Pass mine project in Humboldt County, Nevada.
The LPO says the project would help “secure reliable, sustainable domestic supply chains for critical materials, which are key to reaching our ambitious clean energy and climate goals and reducing our reliance on economic competitors like China.”
Lithium Americas Corp. on its official website says battery materials could be “completely sourced and manufactured in the U.S., bringing down the overall carbon footprint, transport costs and supply chain risks.”
The LPO says lithium carbonate from Thacker Pass could eventually support the production of batteries “for up to 800,000 electric vehicles (EVs) per year, saving 317 million gallons of gasoline per year.”
Although the U.S. has made pioneering and groundbreaking contributions to the development of the lithium ion battery, industry experts say lithium processing and EV battery production is dominated today by China.
“Parts of our key supply chains, including for clean energy, are currently over concentrated in China,” said U.S. Treasury Secretary Janet Yellen in prepared remarks March 2 when she visited a U.S. lithium processing facility in Chile, which holds the world’s largest reserves of the metal.
“This makes America more vulnerable to shocks in China, or whatever country dominates production, from natural disasters to macroeconomic forces, to deliberate actions such as economic coercion.”
A report last year by the Organization for Economic Co-operation and Development said China increased restrictions on its exports of critical minerals ninefold between 2009 and 2020.
Data from the U.S. Geological Survey shows the output and scale of lithium mines in Australia and Argentina far exceed China’s. In 2022, Australia's lithium mine output was more than three times China's.
Refining, processing still issues
But industry experts say while Western countries have poured a lot of investment into developing raw minerals, they have paid little attention to refining and processing, areas in which China dominates.
Ellen R. Wald, a nonresident senior fellow with the Atlantic Council Global Energy Center, tells VOA, "Lithium is not useful just as it is. You have to refine it to make what's used in the batteries. And that's really where China controls the supply chain because almost all of the refining for lithium that creates it into the substance that can be used to make batteries is done in China."
According to the Chatham House, Chinese companies accounted for about 72% of global lithium refining capacity in 2022.
China also dominates much of the global market for battery-related equipment, leaving limited options for U.S. companies that want to showcase their domestic production credentials.
American Battery Factory Inc., or ABF, is an emerging battery manufacturer that says it is “the first network of entirely U.S.-owned vertical manufacturing, supply chain and R&D for Lithium Iron Phosphate battery cells in the United States.”
But to secure custom automation equipment and machinery for use in its first large-scale rechargeable battery factory in Tucson, Arizona, it has formed a partnership with Lead Intelligent Equipment, a Chinese company.
Dependent on China
In an article in January, Wald said China is in a good position to restrict access to lithium-ion batteries to certain countries or companies as it wishes, and if the U.S. military suddenly finds itself in need of more specialized batteries, the Pentagon may not be able to obtain them.
In February 2022, China announced sanctions against Lockheed Martin, the manufacturer of the F-35 fighter jet, and Raytheon Technologies, the world's largest missile manufacturer. Although China did not specify the details of the sanctions, it is generally considered to be a possible threat to cut off the Western countries' supply of critical minerals.
Wald told VOA, "The U.S. defense industry is basically dependent on China for these specialized batteries that they need in all of their drones and their surveillance systems and all sorts of things."
David Whittle, adjunct professor in resource engineering at the Department of Civil Engineering at Monash University in Australia, told VOA even if "the world develops a robust, independent supply chain for lithium, up to the point of battery chemical production, at present, China would still be the largest customer for those chemicals, since it is the largest cell manufacturer, the largest battery pack manufacturer, the largest E.V. manufacturer and the largest market for E.V.s."
The Thacker Pass lithium mine is located at the southern end of the McDermitt Caldera, and is considered to be one of the largest in the world.
The record loan to Lithium Americas Corp. is the largest such loan the U.S. has offered for the development of a lithium mine project since the country stepped up its efforts to build a domestic supply chain for critical minerals in recent years.
The Thacker Pass lithium project is not expected to start production until 2028, and even then, Wald said, that goal may be too ambitious. The mine plans to extract lithium from clay, but Wald says it has never been mined in this way on a commercial scale. In addition, the mine is in a remote and sparsely populated location, requiring the company to build housing for workers and their families and to reassess its environmental impact.
Despite the challenges, Wald said creating a secure supply chain is not impossible for the U.S.
"I don't think it's too late," Wald said. "Will they be able to compete with China globally? Probably not. But can we create non-Chinese sustainable and secure supply chains? Yeah, we can do it."
Whittle said Western countries being "resilient to challenges from China" can't mean "isolated from China" anymore, but resilience is still possible.
The DOE’s LPO said while their announcement shows intent to give the loan, the company must first satisfy certain technical, legal, environmental and financial conditions before the funds will be released.
Adrianna Zhang contributed to this report.
