Barriers to a Bolivian Lithium Export Market

Bolivia has the largest lithium resources on the planet, yet for all the hype, significant obstacles to developing these reserves cast doubt on whether it will supply world markets with the necessary amount of the resource to change the economics of EVs. Nearly every time Li-ion batteries make headlines, Bolivia is referred to as key to the transformation, especially with regard to the effect the abundance of resources has of de-escalating global lithium prices. Tapping the countrys lithium resources could enhance Bolivias economic prospects and contribute to a more rapid adoption of electric vehicles globally, but technical questions about Bolivian lithium, a lack of infrastructure, and political and social issues in the country are likely to continue to impede progress towards a functioning export market.

The Economics of Lithium and EV Markets

After General Motors (GM) announced its intention to launch the first mass-produced lithium-ion (Li-ion) powered plug-in hybrid electric vehicle (PHEV), the realization of the critical role lithium will play in the future car market spread among the largest global car manufacturers as they rush to develop vehicles for the green market. As both GM and Nissan approach the launching date of their Volt and Leaf cars, the electric vehicle market is beginning to take shape. At first glance, there is no way to know for certain what this market will look like. Proponents say that the transition to electric propulsion will most likely take place gradually during the next 20 years or so. If the global auto market grows to 1 billion cars by 2030 (a number that is well within reason), and EVs make up even a relatively moderate share of that overall growth, substantial amounts of lithium will be necessary. Policy makers and auto manufacturers are placing their bets on this technology, driving an upward trajectory for lithium demand. This explains the price increases in recent years. Current lithium prices are $8/kg, up from $.50/kg in 2000. The extent of the increase in a relatively short time implies some sort of speculative bubble, with analysts predicting further increases. We believe that demand is slated to rise dramatically, according to a recent report by the investment adviser Byron Capital Markets, predicting a 40 percent increase in demand for lithium from 2009 to 2014. Credit Suisse, in a recent report, predicted a 10.3 percent annual growth in demand for lithium between 2009 and 2020.

If a lithium supply squeeze sends lithium prices through the roof, it would cause fully-loaded batteries to add more than $10,000 to a cars total cost. For low-margin electric vehicles, rising lithium prices could be a deal breaker to achieving widespread market adoption. 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.

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