A Critique of Petersen's 'DOE Questions the Presumption of Plenty'

Includes: FMC, NSANY, SQM
by: Juan Carlos Zuleta

In a recent article, John Petersen has argued inter alia that: (i) using “eight to twelve kg of lithium” in a Li-ion battery “is massive for a non-recyclable product in a world that only produces three grams of lithium per person”; (ii) “while companies like FMC Corporation (NYSE:FMC) and Chemical & Mining Co. of Chile (NYSE:SQM) can significantly increase their production if enough money and time are spent developing new mines, there is no meaningful chance that electric vehicles will ever reach "relevant scale" using current technology. Under the circumstances, I have to wonder whether a lithium-ion business model that depends on substantial short-term cost reductions isn't at least a little optimistic”; (iii) “plug-in vehicles are unconscionable waste masquerading as conservation and the less glamorous solution of Prius class HEVs is six times more efficient at using batteries to reduce fuel consumption and CO2 emissions”.

In what follows I criticize the main thrust of Petersen´s arguments. For the last two years or so this author has been arguing persistently against Li-ion batteries, plug-in and electric cars. This isn´t the first time I spend some time to counteract Petersen´s views.

First, eight to twelve kg of Li metal is definitely a grotesque overestimation of the quantity of Li utilized by the Volt and the Leaf cars. The correct figure for the Leaf is 21,28 kg of Li Carbonate since there is no lithium metal in Li-ion batteries. I presume that this error is only the result of Petersen´s lack of kwnoledge of the subject. Furthermore, contrary to what Petersen indicates, lithium is already a recyclable product.

In addition, Chemetall, the second largest lithium producer in the world, has last year received funding to put in place a pilot plant for the recycling of Li-ion batteries, and Nissan and Sumitomo have just announced joint plans to establish a “4R” business venture to “reuse, resell, refabricate and recycle” Li-ion batteries used up by electric cars.

Second, Petersen´s argument about “relevant scale” of Li production is meaningful only if Bolivia is excluded from the lithium picture. If Bolivia changes its current perspective and provides the correct signals to the market, short-term cost reductions can indeed be expected, even though Li constitutes a very small part of the inputs in a Li-on battery. As I have recently argued elsewhere “Bolivian lithium could help put downward pressure on the international market, but only if it can be exported in significant quantities.

A lack of Bolivian supply, on the other hand, could shift the strategic balance towards China. China both possesses as least as much lithium as the United States - especially in Tibet, which has substantial reserves - and is making plays in other countries to capture the market. While most U.S. lithium imports now come from Chile and Argentina (69 and 29 percent, respectively) China has brought large domestic supplies online in the last few years”.

Third, it is strange that, on the one hand, Petersen argues that NiMH batteries are constrained by availability of Lanthanum and, on the other hand, he favors a “less glamorous solution of Prius class HEV”, which happens to use NiMH batteries. Lastly, if these batteries are so efficient, why then have both Hyundai and Toyota just announced that in their next HEVs (including, in the case of Toyota, a new version of the Prius) they will use Li-ion, not NiMH, batteries?

* A previous version of this article was published on EV World.Com on April 23, 2010

Disclosure: Author is a lithium economics analyst based in La Paz, Bolivia. In January 2010 he participated as an invited speaker at the Lithium Supply & Markets Conference held in Las Vegas, USA. He holds no positions in any stocks.