U.S. lithium imports could spike higher as battery-makers ramp up production to meet surging demand for electric vehicles.

Lithium imports have risen in 2021 as industrial activities rebound from a pandemic-driven slump in 2020 and the small number of battery manufacturers based in the country ramps up production of EVs to meet surging demand. Third-quarter U.S. imports of processed and refined lithium increased 37.8% year over year, with a total of 11,368 tonnes brought into the country.

Much of the imported lithium coming into the U.S. is used to make industrial products, such as glass or grease. Far less goes toward making the lithium-ion batteries used in EVs, according to industry analysts. Instead, the country imports finished batteries made abroad, mainly in China, because the U.S. still has little in the way of battery cell and materials production. In 2020, North American lithium-ion battery cell capacity represented just 7.6% of global capacity, according to Benchmark Mineral Intelligence data. In comparison, 75.3% of battery cell capacity was located in China.

But the amount of lithium demand coming from the region could increase as a wave of U.S. battery manufacturing capacity comes online. In 2021, major automakers announced a flurry of plans to build new battery plants and EV assembly lines in the U.S. The country's contribution to global battery capacity is expected to reach 15% by 2030, according to Benchmark Mineral Intelligence's gigafactory tracker. Alongside that increase will come the need for raw materials including lithium.

"As battery plants are built, come online and ramp up their production, the lithium demand should move pretty closely in sync with that," said Seth Goldstein, senior equity analyst for MorningStar.

Although some of the lithium supply could be sourced from the U.S., Goldstein said, "ultimately, I think the vast majority of lithium will need to be imported, either in raw material or finished form, into the U.S."

Automakers show off battery plans

Ford Motor Co. announced plans in September to construct three lithium-ion battery factories in Kentucky and Tennessee, aiming to roughly double the 2020 U.S. battery production capacity by adding 129 GWh of manufacturing a year, with production starting at the plants in 2025. The project, built in collaboration with South Korean battery-maker SK Innovation Co. Ltd., could catapult the country up the ranks in global battery capacity at a time when U.S. contributions to the battery supply chain are tiny compared with those of China.

General Motors Co. announced Dec. 8 that it would devote $160 million to building a new battery pack assembly line at its Orion plant in Michigan. The news came on the heels of a Dec. 1 announcement that the company would form a joint venture with South Korea's Posco Chemical Co. Ltd. to erect a facility in North America to process battery materials for its Ultium EV line.

"Our work with Posco Chemical is a key part of our strategy to rapidly scale U.S. EV production and drive innovation in battery performance, quality and cost," Doug Parks, executive vice president of global product development, purchasing and supply chain at General Motors, said in a statement Dec. 1. "We are building a sustainable and resilient North America-focused supply chain for EVs covering the entire ecosystem from raw materials to battery cell manufacturing and recycling."

With plans to open the facility in 2024, General Motors said the cathode materials would go to its battery cell factories in Ohio and Tennessee, which the company is developing through a partnership with LG Energy Solution Ltd. General Motors also has two other battery cell plants in the pipeline this decade.

On Dec. 7, Toyota Motor North America Inc. said it had selected North Carolina for a $1.29 billion battery manufacturing plant.

California-based EV giant Tesla Inc. already oversees a battery manufacturing complex in Sparks, Nev., with Japanese electronics company Panasonic Corp. The EV-maker is also piloting a battery cell and energy storage factory in Fremont, Calif., with plans to expand into Texas.

All these anticipated battery facilities will require a stable supply of raw materials, including lithium. Some of this supply could come from U.S. mined or extracted lithium, but lithium demand over the next decade will far exceed what domestic supply can offer, analysts said.

General Motors has partnered with Controlled Thermal Resources to eventually source lithium from geothermal resources in California. Ford CEO Jim Farley called attention to the lack of domestic battery material options.

"Most of what the EV makers have tried to secure in the U.S. is new upstart technology-based resources that may never come online, and if they do, would only supply a small fraction of the total lithium demand that will be needed even just to meet U.S. production," Goldstein said. "So, while it's smart for the automakers to try to go out and find any new source of the lithium they can, and while it's smart to try to localize our supply chain as much as possible from the raw material all the way to the EV, lithium will still need to be imported."

S&P Global Market Intelligence analysts forecast a lithium deficit emerging in 2021 and persisting through at least 2022. In addition to the tight market, permitting hurdles and insufficient processing infrastructure in the U.S. have hindered the country's development of lithium mining and processing.

The Biden administration has set some U.S. policies to strengthen domestic critical mineral supply chains aimed at bringing raw material, battery and EV production closer to home or sourcing these products from nations considered allies to the U.S.

In November, Tesla looked beyond U.S. borders for its lithium, signing a contract with Chinese lithium giant Ganfeng Lithium Co. Ltd. to supply battery-grade lithium hydroxide products for three years starting in January 2022.

Complicated supply chain

Lithium is transformed into various states as it moves along the supply chain. Companies first extract lithium ores or brine concentrates and process the ore into lithium compounds. The processed material is then refined into lithium chemicals. Refined lithium includes products such as lithium metal and lithium chloride, while processed lithium includes lithium carbonate and lithium hydroxide.

The overwhelming majority of processed lithium imported into the U.S. during the third quarter came from South America, with 51.3% originating in Argentina, followed by 44.9% in Chile. Most of the refined lithium brought into the U.S. came from China and Germany. Annual U.S. lithium import volumes paled in comparison with the 504,000 tonnes LCE of global lithium demand expected by the end of 2021.

The lithium that is imported into the U.S. is likely going to either industrial products or Tesla and Panasonic's battery making. Although total lithium imported into the U.S. rose year over year in the third quarter, refined lithium imports slowed. Benchmark Mineral Intelligence lithium analyst George Miller told Market Intelligence this dip in refined lithium imports may have been caused by "low availability [of lithium] given market tightness or high prices pushing industrial importers away from more orders."

Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.