ExxonMobil joined leading lithium producers this week in reaffirming an optimistic outlook on long-term lithium demand despite the current bear market and the recent price drop for the metal crucial to the energy transition.
Lithium prices have fallen in recent months, driven by inventory buildup amid slowing growth in electric vehicle sales. Lithium producers said earlier this year that the current low price environment is “unsustainable” and could hamper investment in new sources of supply.
However, all lithium producers, including the world’s largest, Albemarle, are optimistic about the long-term prospects for the key battery metal.
Oil giant Exxon, which last year announced plans to produce lithium in Arkansas to become a major supplier of electric vehicle batteries by 2030, is also bullish on long-term demand for electric vehicles and lithium despite the bearish short-term market outlook.
“What we’re seeing in the lithium market right now is a bearish sentiment,” Patrick Howarth, director of global lithium business at Exxon, told Bloomberg in an interview on the sidelines of the Fastmarkets Lithium Supply and Battery Raw Materials conference in Las Vegas.
“But behind that is a story of growth in demand for electric vehicles and the lithium-ion batteries used in those vehicles,” Howarth added.
“We know that the world urgently needs much more lithium than it currently produces.”
As part of the energy transition, Exxon is hedging its bets by developing a project to extract lithium from underground saltwater deposits in southwest Arkansas and process it on site into a battery-grade material.
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In November, the oil giant announced it had started drilling the first lithium well in Arkansas as part of its ambitions to become a leading supplier of electric vehicles by 2030.
Exxon is targeting first lithium production for 2027 and is also evaluating growth opportunities globally. By 2030, ExxonMobil aims to produce enough lithium to meet the manufacturing needs of more than a million electric vehicles per year. The company is in ongoing discussions with potential customers, including electric vehicle and battery manufacturers.
This week, Exxon signed a non-binding memorandum of understanding with South Korean electric vehicle battery developer SK On, which could pave the way for a multi-year supply agreement ranging up to 100,000 metric tons of Mobil Lithium from the first project planned in Arkansas. SK plans to use lithium in its electric vehicle battery manufacturing operations in the United States. SK On currently operates two battery plants in Commerce, Georgia, and is building four more through joint ventures with Ford Motor Co. and Hyundai Motor Group.
“The world needs more lithium to meet its emissions goals, and we are doing our part to promote solutions in the United States,” said Dan Ammann, Pres. president of ExxonMobil’s Low Carbon Solutions division, commenting on the deal.
Exxon highlights two strengths in its future lithium supply.
First, the drilling technologies and skills to produce lithium from deep brines like those in Arkansas are very similar to those the supermajor has used for decades in its oil business re and gas. Second, Exxon also has a rich history of technical partnerships with the automotive industry.
Still, Exxon believes its core oil business will be needed in the auto industry for many years to come.
With electric vehicle fleets growing, the world “also needs internal combustion engine vehicles for many years to come,” said Exxon’s Howarth at Bloomberg.
“So I think our lithium business and our oil business can coexist.”
Despite the recent collapse in lithium prices, Exxon and major lithium producers remain optimistic about the long-term prospects of this critical mineral. Exxon is focused on long-term fundamentals, which are favorable to lithium suppliers, Howarth said at the Las Vegas conference.
“We are really focused on the fundamentals of the underlying business,” emphasized the executive.
“We are not scared by low prices, and we are not attracted by high prices.”
By Tsvetana Paraskova for Oilprice.com
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