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In the first part of my article I discussed the main determinants of adoption of lithium batteries by the global automobile industry. Here I further develop the original argument to show how those factors interact among each other and the way the lithium battery market operates within the Lithium Supply Chain to conform the basis for a more compact model of lithium battery adoption. Lastly, I analyze Bolivia´s lithium prospects to see the efforts it is making to develop the world´s largest lithium resource, together with the physical, political and social challenges, and a preliminary personal view on the industrialization of the Salar de Uyuni.
Interactions Among the Different Determinants of Adoption of Li Batteries
As shown in Figure 3, the arguments previously discussed may become more complicated. In what follows an effort is made to show some examples of how adoption itself influences its very determinants and how they in turn interact among themselves to form a sort of cumulative causation model.
  • Relation # 1: As adoption of Li batteries proceeds, the demand for oil could tend to diminish, eventually leading to a price decrease which discourages adoption of Li batteries. This could be ameliorated by a pro-change government that places a tax on gasoline, while providing more funding for technological development, for example.
  • Relation # 2: As adoption of Li batteries proceeds, acceptance of change will increase (and resistance to change will decrease), further encouraging adoption as well as financial support for technological development and government policies aimed at energy independence.
  • Relation # 3: As adoption of Li batteries proceeds, technological development will be encouraged, further promoting adoption, while tending to diminish the demand for oil, and eventually leading to a price decrease which discourages adoption of Li batteries. As in Relation # 1, this could be controlled by a pro-change government with some specific policy directed to limit the supply of oil, for example.
Figure 3
(Click to enlarge)
The Lithium Supply Chain
To enrich the analysis, in Figure 4, the notion of Lithium Supply Chain is introduced. In its most basic form, this concept implies a set of relations among the three markets in terms of supply and demand which can be explained as follows. First, the EV Market demands Li-batteries which in turn requires lithium from the resource market. Second, the resource market supplies lithium to the Li battery market which in turn supplies Li batteries to the EV market. It is clear that, other things being equal, the new markets also interact with the determinants of Li battery adoption, while they may themselves be influenced by other factors.
A new set of relations can therefore be established as follows.
  • Relation # 4: As the price of oil increases, the demand for Li may tend to increase, because the demand for Li batteries will be increased due to an increase in the demand for electric cars. But, as the supply of Li increases the price of oil will decrease because the supply of Li batteries may also increase, encouraging the production of electric cars, while further discouraging the demand for oil.
  • Relation # 5: As technological development (say of Li-air batteries) proceeds, more and more Li will be required because the demand for Li batteries will also be increased, due to a greater demand for electric cars. But, if there is no sufficient lithium to meet the additional requirement of the resource, the prices of lithium will increase discouraging that specific type of technological development, because the demand for Li batteries will have most likely decreased due to a reduction in the demand for electric cars in view of the increase of the cost of the batteries.
  • Relation # 6: As the acceptance of change (say on the part of the government) increases, the demand for electric cars will also augment, tending to diminish the price of electric cars which in turn will further encourage the acceptance of change.
Figure 4
(Click to enlarge)
Bolivia´s Lithium Prospects
As is well known, with its 5.4 million MT of Li content (US Geological Survey), Bolivia holds the world´s largest reserves of lithium. Since May 2008 the government has been developing a pilot plant to obtain around 480MT of Li Carbonate a year. As of October 2009 the progress of the plant showed a delay of at least 6 months which implies that it will become fully operational only in 2011. In addition, the government has announced that it will invest US$ 350 million on an industrial plant to produce between 20,000 and 30,000 MT of Li Carbonate beginning 2015.
The lithium endeavour in Bolivia faces at least three different kinds of challenges. First, at the political level, the government has decided to go on its own. According to the Project Director, the industrial plant will be completely owned by the state because: (1) Bolivia has the largest reserves of lithium in the world; (2) that is the only way to ensure that the benefits will be reinvested in the region and in the country; (3) Bolivia should guarantee the supply of Li to the world on clear market conditions; and (4) exploitation and industrialization of Li should be sustainable and integral. As plausible as they might seem, these conditions do not seem to conform the basis for a reasonable strategy of development of the lithium resources in Bolivia. However, if the car revolution takes off, chances are the government will be forced to revise its decision to go on its own.
Second, at the physical level, the brine resources in Bolivia need to overcome at least the following hurdles: (1) the low evaporation levels at the Salar de Uyuni ; (2) their high Magnesium-Lithium ratio; and (3) their lack of free access to the sea. As reported at the First International Forum on Science and Technology for the Industrialization of Lithium and other Evaporitic Resources held in La Paz in October 2009, the University of Potosi (with the assistance of the University of Freiberg from Germany) appears to have made important progress aimed at improving evaporation rates at Uyuni using dynamic cones of intensive evaporation. Similarly, both the government´s pilot project and the University of Potosi announced that they were able to separate Mg towards the end of the process taking recourse to different chemical procedures[1].
However, Bolivia´s lack of free access remains an important problem because it will most likely increase the cost of transportation of Li carbonate to the nearest maritime port while reducing its competitiveness.
Third, at the social level, there is a general feeling in the communities living nearby the Salar de Uyuni that exploitation and industrialization of lithium should help them overcome their situation of poverty. However, the government has not yet put together a plan to face this important issue. Of course one should be rather cautious about the real possibility to generate a lot of jobs in the production of Li because this is known to be a capital intensive business.
Finally, in a series of two articles published in two major newspapers in La Paz, Bolivia, between September and October 2009, the author of this study has advanced a preliminary proposal for the industrialization of the Salar de Uyuni. To begin with, in order to develop the country´s lithium and other resources a real scientific-technological revolution should be implemented in Bolivia, but this is a long run and costly effort. The Bolivian state should face this challenge but this does not imply to postpone almost indefinitely lithium exploitation.
Bolivia should not spend its scarce money and time on “reinventing the wheel” trying to develop its own lithium carbonate technology without the appropriate knowledge and human resources. Given all the delays and technical problems facing the government´s pilot plant, this author wondered whether it would have been better to hire some international specialized firm with the necessary know-how and human resources to assist the government to develop and implement the pilot plant.
Apart from the scientific-technological development that the government should support during the following 20 years or so, the strategy should contemplate the quantification of the reserves of all evaporitic resources in the Salar de Uyuni, through the most modern prospection methods, including 3-D satellite ones, similar to the ones used in the hydrocarbon sector.
In accordance with the results of this activity, the salar should be divided into different areas of exploitation in a grid. The government could then invite all interested specialized companies to submit exploitation proposals on Bolivia´s conditions based on service contracts similar to the ones the country has agreed upon with foreign private oil companies currently operating in Bolivia. Based on the results of the exploration process, the country could decide which areas are assigned to specialized international firms and which areas are reserved for future exploitation. Within this framework, lithium carbonate delivery deals could be agreed upon with those companies so as to insure that Bolivia is in charge of its commercialization or utilization in subsequent industrialization processes.
This approach should guarantee the immediate launch of an industrial scale operation to produce mostly Li carbonate. It is imperative to act like this because this is the only way Bolivia can send the correct signals to the Li battery and electric vehicle markets and take an important share in the lithium market. Finally, with some of the proceeds obtained from exports of Li carbonate and other derived chemical compounds, Bolivia could advance rapidly towards a more comprehensive process of industrialization of lithium to produce different classes of lithium batteries and electric cars in the country, through strategic joint ventures with the most competitive international firms in the world along Bolivia’s lithium supply chain.
Disclosure: No positions

[1] In this connection, while the government´s plant informed it had obtained Li carbonate of 99.5% of purity, the University of Potosi showed a result in the order of magnitude of 90% at the laboratory level. Nevertheless, at the forum, many experts commented on the apparent technical superiority of the process developed by the University of Potosi. This probably explains why the government has just announced that it will be working together with that institution in the development of new technologies aimed at improving the production of lithium.

Source: The Future of the Lithium Market, Part II