Impact of Constrained Lithium Supply to the US Defense Industrial Base
Impact of constrained lithium supply to the US defense industrial base
Over the last twenty years, lithium (periodic symbol: Li) has evolved into a critical material for the US Defense Industrial Base (DIB). Uses for lithium within the DIB and the US economy continue to expand. The increasing reliance on lithium is readily apparent to casual observers. However, the fragility of the world’s lithium supply chain remains more challenging to perceive. Over the last decade, the lithium supply has lagged behind demand across the market. With regard to national security, how lithium limits the surge capacity of the DIB is particularly concerning. The negative impact on the DIB’s surge capacity is not a forecasted problem; instead, it is a present and worsening problem. Policymakers should view risk to the DIB and national security as unacceptable. US policies and corresponding strategies must quickly evolve to address the ongoing and projected challenge to the lithium supply chain and the associated negative impact on DIB surge capacity.
Background–What lithium is/how it works/supply chain history
Scientists identified lithium as a distinct alkali metal element in the year 1817. However, the use of the new metal proved difficult as it did not respond to conventional electrolysis—the process used to isolate and separate some metal elements found in the natural environment.1 It was not until the latter half of the nineteenth century that scientists were able to isolate lithium through extreme heating paired with electrolysis.2 From this point forward, lithium received use in a wide range of applications—most of which have emerged in the postindustrial era.
Figure 3. Global EV sales February 2011 – February 2022.8[/caption]
Lithium’s innate resistance to regular electrolysis remains key to the material’s usefulness. At room temperature, lithium is stable and does not easily break down when exposed to a sustained electrical charge. Lithium is also much lighter than most alkali metals. The combined features of resistance to deterioration, conductivity, and low weight relative to mass have made lithium an attractive material for batteries.
As uses for lithium expanded during the twentieth century, supply generally kept pace. However, lithium’s supply and demand profile evolved in the twenty-first century. Demand has increased exponentially with improved battery technology and expanded product applications, including significant growth in telecommunications, transportation, and power storage.
Various forms of lithium receive use across a wide range of commercial applications, including high-end manufacturing alloys, medicine, ceramics, and air conditioning.3 However, over the last fifteen years, batteries have consumed most of the world’s lithium supply. Presently, battery production consumes 65% of the lithium market, with most production occurring in China. The balance of raw lithium usage spreads across the following sectors: ceramics and glass – 18%, lubricating greases – 5%, polymer production – 3%, continuous casting mold flux powders – 3%, air conditioning equipment – 1%, small scale/niche uses – 5%.4 Global demand for lithium remains on track for tremendous growth in the coming years. The next three to five years, in particular, promise to be especially challenging.
The chart at figure 1 depicts the severity of the lithium supply problem. The black line within the chart depicts current and forecasted market demand. Yellow bars speak to proven production, while blue depicts additional forecasted production. The shades of blue indicate degrees of risk – dark blue bars have solid footing, while lighter shades of blue indicate increased risk concerning production and availability.
Until recently, lithium production has kept pace with rapidly expanding demand in the market. However, due to COVID-19 related impacts on market behavior, lithium supply temporarily surpassed demand—this resulted in a tapering of global production, a dramatic price drop, and a (false) sense of confidence. The surplus lithium supply has now been exhausted, and production has not ramped up sufficiently to meet current demand. The spot price for lithium is now at an all-time high and almost 500% higher than last year. The present problem is challenging enough, but it pales compared to projected supply problems over the next three to five years. Furthermore, problems over the next ten to fifteen years may prove disastrous without change across the market.
The chart at figure 2 depicts the Chinese market price of lithium over the last five years. The chart is depicted in Yuan as most lithium component manufacturing occurs in China.6
Over the last decade, especially in the last five years, commercial sector demand for lithium has advanced primarily through global Electric Vehicle (EV) sales. Figure 3 depicts global EV sales through the last ten years. Despite the challenges of the COVID-19 global pandemic, 2021 proved to be a banner year for the electric auto industry.
Lithium and the Defense Industrial Base
As with commercial demand, defense-related lithium requirements have steadily increased over the last twenty years. However, the need for lithium within the defense sector will, in all likelihood, expand sharply over the next five years. Should a conflict with a peer or near-peer competitor occur, the gap between supply and demand may reach new extremes.
Along with extensive use in batteries, lithium enables several additional capabilities within the defense sector. Examples include alloys used in steel armor plating, combat-rated impact glass, and several polymers needed for aerospace, cyber, nautical, and space-related hardware.9 Lithium-related demand within the defense sector is poised to grow sharply in the near term. Two defense requirement categories will drive this change; these are (1) autonomous vehicles and (2) microgrids. Lithium applies to several other defense-related requirements. However, these two misunderstood categories likely provide the strongest demand signal.
Autonomous and remotely piloted vehicles are becoming more and more prevalent across the battlefield environment. This new breed of weapon systems participates in the air, land, sea, and space domains. Paired with artificial intelligence and advanced algorithms, new autonomous and semi-autonomous weapons systems continue to push the character of warfare into new directions. Within the ongoing war in Ukraine, remotely piloted aircraft like the Turkish-made Bayraktar Tactical Unmanned Aerial System have proved decisive. As with other unmanned weapons systems receiving operational use during the ongoing conflict, the Bayraktar relies on relatively lightweight, long-lasting lithium-ion batteries for propulsion and to supply power to on-board avionics, communications, and combat systems.10 Lithium-based power supplies enable extended battlefield loitering times while exposing a relatively slim operational profile. The light footprint and low heat signature of the Bayraktar make it resistant to conventional anti-aircraft and detection systems. In addition to having success in Ukraine, the Bayraktar also proved effective in Syria and the recent Armenia-Azerbaijan war.
Air-based autonomous and semi-autonomous weapons systems have taken the spotlight in recent conflicts. However, lithium-powered capabilities are abundant across the other physical warfighting domains.
Space-based systems have long relied on lithium-ion batteries paired with solar panels. Space capabilities have been pivotal to the American way of war since the first Persian Gulf War. Unsurprisingly, space-based systems have become more capable with improvements in computing hardware and software fueled by top-end lithium-ion battery systems.
Lithium-enabled weapons have taken center stage in space and cyber domains. However, the same level of impact will soon occur in the land and sea domains. Lithium-ion battery-enabled robot combat systems like the Army’s Ripsaw autonomous combat vehicle and the Navy’s Snakehead Large Displacement Unmanned Undersea Vehicle (LDUUV) have reached the initial stages of operational fielding.11 These systems, and others like them, may prove decisive in future conflicts.
Weapons systems that function at or near the front line typically receive the most attention within defense circles.14 However, one of the essential capabilities enabled by lithium batteries includes the opportunity to construct power supply microgrids. Independent microgrids reduce and eliminate the risk associated with large power production sites. Microgrids gather and store power provided by conventional generator farms, solar panels, wind turbines, or other forms of renewable power production. In forward combat areas, microgrids enable operational resilience and reduce risk by creating the opportunity to disperse both power production and power supply. This spreading of assets makes for a much harder target.
In addition to the capability provided to forward war fighters, microgrids offer the opportunity for exceptional resiliency to the civilian sector—both in times of peace and in times of war. Microgrids have the potential to significantly limit the negative impacts from natural disasters and manmade disasters—such as a precision deep strike attack against a large power plant.
Environmental, Social, and Governance (ESG)
While lithium offers tremendous environmental benefits by reducing—and potentially eliminating—the need for carbon-based energy, the material also offers particular environmental challenges. Extracting lithium typically involves large-scale strip mines and significant quantities of water. Additionally, some skeptics have asserted that lithium is difficult to recycle and may create as many problems as it solves.15 However, the accelerating rate of global climate change may prove to be a forcing function for lithium technologies and the policies that guide the industry.
More than 95% of lithium extraction occurs in four countries: Australia, Chile, China, and Argentina.16 These countries increased lithium production in each of the last five years. However, supply continues to fall short of demand. Prospects for the long term are even worse. Planned mine expansions do not come close to forecasted requirements.
Despite the aforementioned difficulties, some hope is available regarding lithium production. A tremendous surge in lithium surveying activity is underway globally. This multipronged survey effort has achieved success and will likely continue to achieve success. New and expanded lithium reserves are being revealed on an almost daily basis. As a whole, known sources for lithium have increased by more than three times over the last three years.17 However, the efficacy of these new sites remains unproven. Further exploration and proof must occur.
Increased lithium production has advanced innovation within the mining industry. Conventional lithium extraction requires 500,000 gallons of water per ton of useable material. However, new extraction techniques may enable this number to drop to almost zero.18 While getting to zero water use may ultimately prove unreasonable relevant to the associated costs, other innovations offer more in the near term. Recent research at the University of Texas hints at the potential for a low-cost method of removing lithium from contaminated water.19 If proven and fielded, this new method could transform the industry.
Most lithium processing occurs in China, particularly most high-end lithium processing. The lack of diversification in lithium processing presents a substantive challenge to US security.
While the distribution of lithium reserves continues to grow, the global economy’s ability to process lithium remains constrained. Most lithium processing occurs in China, particularly most high-end lithium processing. The lack of diversification in lithium processing presents a substantive challenge to US security. New processing capabilities are emerging globally. However, to date, these new sites are relatively inconsequential.
As supply and demand challenges across the lithium industry grow, the need for intelligent policies also increases. The US must take care in setting governance practices that enable optimal outcomes. Supply and demand must be assured, but the environment must also be protected. More lithium is needed, but failure to halt climate change is its own challenging national security problem.20
Policy & Strategy
The world has changed significantly over the last twenty years—and more change is on the way. US interests benefit when national-level policies and strategies orient on the present rather than the past. However, US interests benefit the most when policies and strategies focus on both the present and the future. Currently, US policies and strategies are wholly unfocused on current and future requirements relevant to the global lithium supply. Additionally, the US approach to policy and strategy should consider both near-term and long-term needs. The US must continuously reassess and update policy and strategy to ensure optimal outcomes in concert with this approach.
For the near term, the US should embrace three strategic lines of effort. First, the US should set policies to enable a sizable strategic stockpile of lithium. A strategic stockpile will enable the US to ride out market fluctuations more easily. Additionally, the US will be more resilient to market denial events (i.e., an event where the US is cut off from the world lithium supply by an aggressive actor or by a natural disaster). In addition to creating a strategic stockpile, the US must increase domestic production of lithium. Doing so will further reduce the risk to US interests. Finally, the US must accelerate research and development to find alternative materials to compete against and potentially outperform the current lithium-based battery market in the near term. US-funded research could enable new and separate energy storage options. Alternatively, US-funded research into energy storage technology could help make better lithium batteries—configurations requiring less lithium while providing more power.
Over the long term, the US needs to consider two lines of effort. The first is that the US must ensure that it possesses a vertically integrated lithium industry capability. Presently, no such capability exists. The US has minimal mining capacity, limited processing capacity (refining lithium into useable material), and minimal component production capacity (battery production). The US must reduce strategic risk by building and sustaining a domestic capability. The second long-term approach includes attention to US allies and key partners. Assuring that allies and partners have reliable access to lithium will reduce risk to US interest. The US way of national security relies on healthy alliances. Insecure US allies makes for an insecure US.
Lithium, which economists increasingly refer to as ‘the new oil,’ remains a vital resource for the US, our allies, and our strategic competitors. Modern economies, and the militaries that defend them, cannot function without stable access to lithium-enabled products. World lithium production tripled from 2011 to 2021, mainly due to production increases from China and Australia. Projections for the next ten years indicate that lithium demand will increase between seven-fold and twelve-fold. Consequently, production increases may prove insufficient for projected demand. As with oil in the 20th century, disconnects between the supply and demand of lithium may drive international behavior in the 21st century [i.e., Paraguay-Bolivia 1932, Japan-US 1941, Iraq-Kuwait 1990, etc.].
Australia, a US ally, holds the largest lithium reserve, which reduces risk to US interests. Large lithium reserves exist in several parts of South America, further reducing the risk to US interests. However, risks offset by new lithium mines in South America rebound due to the same countries having joined China’s Belt and Road Initiative (BRI). Regarding Australia, the tyranny of distance and proximity to China adds risk, especially in the event of a shooting war involving world powers.
How lithium limits the surge capacity of the DIB is particularly concerning. The negative impact on the DIB’s surge capacity is a present and worsening problem that will degrade further before it can improve. Policymakers should view risk to the DIB and national security as unacceptable. US policies and corresponding strategies must quickly evolve to address the ongoing and projected challenge to the lithium supply chain and its associated negative impact on US interests.
By Lt Col Paul Frantz, USAF, Student, Seminar 13, The Dwight D. Eisenhower School for
National Security and Resource Strategy, National Defense University
The views expressed in this paper are those of the author and do not reflect the official policy or position of the National Defense University, the Department of Defense, or the US Government.
1. Royal Society of Chemistry, “Lithium Fact Page,” ROS.com, available at: https://www.rsc.org/periodic-table/element/3/lithium#:~:text=Lithium%20is%20rare%20in%20the,lithium%20minerals%20to%20be%20discovered
3. Douwe Draaisma, “Lithium: the gripping history of a psychiatric success story,” Nature, August 26, 2019, https://www.nature.com/articles/d41586-019-02480-0
4. Office of the Secretary of Energy, “National Blueprint for Lithium Batteries – 2021-2030,” Department of Energy, June 2021, https://www.energy.gov/sites/default/files/2021-06/FCAB%20National%20Blueprint%20Lithium%20Batteries%200621_0.pdf
5. US Security & Exchange Commission, “Chemical Plat PFS Demonstrates Exceptional Economics and Optionality of USA Location,” SEC, May 26, 2020, https://www.sec.gov/Archives/edgar/data/1728205/000172820520000018/ex99_1.htm
6. China’s domination of the lithium market is currently in decline. Most industrial countries are in the processes of expanding lithium component manufacturing. While China’s volume of production as not declined, its overall market share continues to decrease.
7. Annie Lee, “The Battery Metal Really Worrying China Is Lithium, Not Nickel,” Bloomberg, April 4, 2022 https://www.bloomberg.com/news/articles/2022-04-04/the-battery-metal-really-worrying-china-is-lithium-not-nickel
8. Argonne National Laboratory, “Light Duty Electric Drive Vehicles Monthly Sales Updates,” November 2019, Argonne National Lab website, https://www.anl.gov/es/light-duty-electric-drive-vehicles-monthly-sales-updates
9. Defense uses
10. Naval-Technology webpage, “Bayraktar Tactical Unmanned Aerial System,” NavalTechnology.com, January 11, 2015, https://www.naval-technology.com/projects/bayraktar-tactical-unmanned-aerial-system/
11. Todd South, “Soldier will test Army’s new robotic combat vehicle in 2022,” Army Times, December 21, 2021, https://www.armytimes.com/news/your-army/2021/12/21/soldiers-will-test-armys-new-robotic-combat-vehicle-in-2022/
Amit Malewar, “U.S. Navy showcases its new Snakehead unmanned submarine,” Inceptivemind.com, February 21, 2022, https://www.inceptivemind.com/us-navy-showcases-snakehead-unmanned-submarine/23396/
12. Textron Systems, “M5 Information page,” Textron Systems, accessed April 4, 2022, https://www.textronsystems.com/products/m5
14. Front line = Forward Line of Troops [ref. concepts described in Army Publication 3 & Joint Publication 3]
15. IER, “The Environmental Impact of Lithium Batteries,” Institute for Energy Research, November 12, 2020, https://www.instituteforenergyresearch.org/renewable/the-environmental-impact-of-lithium-batteries/#:~:text=The%20lithium%20extraction%20process%20uses%20a%20lot%20of,and%20pump%20salty%2C%20mineral-rich%20brine%20to%20the%20surface.
16. Vladimir Basov, “The world’s largest lithium producing countries in 2021 – report,” Kitco.com, February 1, 2022, https://www.kitco.com/news/2022-02-01/Global-lithium-production-up-21-in-2021-as-Australia-solidifies-its-top-lithium-producer-status.html
17. M. Garside, “Lithium mine production worldwide form 2010 to 2021,” Statistia, 2022, https://www.statista.com/statistics/606684/world-production-of-lithium/#:~:text=Lithium%20mines%20produced%20an%20estimated,was%20just%2028%2C100%20metric%20tons.
18. Robin Bolton, “Lithium mining is booming – here’s how to manage its impact,” GreenBiz, August 11,2021, https://www.greenbiz.com/article/lithium-mining-booming-heres-how-manage-its-impact
19. UT News, “New Way to Pull Lithium from Water Could Increase Supply, Efficiency,” University of Texas at Austin, September 08, 2021, https://news.utexas.edu/2021/09/08/new-way-to-pull-lithium-from-water-could-increase-supply-efficiency/
20. Flavelle et al., “Climate Change Poses a Widening Threat to National Security,” New York Times, November 1, 2021, https://www.nytimes.com/2021/10/21/climate/climate-change-national-security.html#:~:text=Intelligence%20and%20defense%20agencies%20issued,between%20countries%20and%20spur%20migration.