Lithium Startups Bet on High Demand in Battery-Powered Future

(Bloomberg) -- As the world leans into electrification, it will need more lithium. A key ingredient in the batteries that power everything from electric vehicles to cell phones, demand is projected to accelerate over the next decade.

To meet it, a new crop of startups are working on novel ways of producing the valuable metal and promising to open untapped lithium sources. They’re also battling heavy economic headwinds, pushing their technology forward amid a current market slump. 

Direct lithium extraction (DLE) is an innovative approach to recover the material from brine that’s found on the Earth’s surface or pumped from underground. There are a variety of techniques, ranging from using lithium-attracting beads to using membranes that selectively filter the metal. Although startups have pursued DLE for years, only recently has the tech matured to become potentially competitive with existing lithium extraction methods. 

“Right now the technology is on the cusp of commercialization,” said Sung Choi, a specialist in metals and mining at BloombergNEF. 

Even still, most startups are operating at the lab or pilot level, reflecting the long road ahead to play a meaningful role in the industry. Lithium has traditionally been extracted from brine in open air evaporation ponds or mined directly from rocks. Countries like Argentina and Chile have been lithium-producing powerhouses, responsible for the majority of the lithium imported to the US, because they have more concentrated sources of the metal. (Australia is the world’s largest lithium producer.) 

While lithium demand is about 1 million tons annually today, BNEF projects that it will reach 3 million by 2030 and over 6 million by 2050 under its economic transition scenario, which assumes no new policies will be implemented to accelerate the clean energy transition. Lithium is currently oversupplied due to, among other things, a slowdown in EV sales, which means there’s enough produced via traditional methods to meet demand in the near- to mid-term. But innovation is needed to meet long-term demand driven by the energy transition, Choi said. 

Until recently, the majority of DLE techniques have largely relied on solid materials that can attract lithium chloride, which is refined for use in batteries. Those approaches have only been able to recover modest amounts of the metal, and some materials also attracted unwanted substances that have a very similar chemical structure, such as magnesium. 

A handful of new startups say they’ve overcome those technological challenges, with novel DLE approaches that capture lithium and only lithium. While still expensive, the companies think they can compete in the lithium market, since they use less water and fewer resources than traditional production methods and can work with lower-quality brines with less concentrated amounts of lithium. DLE startups think their techniques can open up new markets, diversifying the lithium supply chain. 

SpecifX is one of those startups. Co-founded by University of California, Los Angeles professor David Jassby, the company has developed a membrane material that uses an electric field to move ions around, while only allowing lithium to cross the “gate.” Although North American brines are generally “more challenging” when it comes to extracting lithium, SpecifX’s approach can work using them, Jassby said.

Beyond being able to extract lithium from brines with low concentrations, DLE has another potential advantage over traditional production methods like hard-rock mining and mass evaporation ponds: environmental impact. Membrane separation technology is “the holy grail of lithium extraction,” because it eliminates the need for water and chemicals, said Charles McGill, chief executive officer of the Rio Tinto-backed ElectraLith. The Melbourne-based company is also developing a membrane-based approach to DLE. 

By comparison, traditional mining techniques are incredibly water-intensive, using as much as half a million gallons of water per ton of lithium produced. Drought-prone countries like Chile are starting to restrict water usage in lithium mining, encouraging miners to adopt DLE. Some mining companies such are already pledging to reduce water usage as well as decrease their reliance on traditional brine extraction methods. For example the world’s top lithium producer Albemarle Corp., for example, has pledged to cut the intensity of freshwater use 25% by 2030 while SQM, the world's second largest, is in the process of choosing DLE technologies to deploy. 

It’s not just membrane-based DLE methods that are attempting to tackle the environmental impacts of lithium production. Another startup, the Princeton-based PureLi, relies on evaporation, but its approach avoids losing the brines’ water to the atmosphere. The startup runs the liquid over a string with a special coating that allows it to differentiate lithium from other parts of the brine, while also harvesting water. Lithium chloride moves faster and further towards one end of the string while other substances stay or crystallize. Princeton researcher Zhiyong Jason Ren, who is leading the effort, calls it a “rock candy approach.” 

Aside from the technological challenges, getting DLE off the ground has proven difficult economically. Today, lithium is cheap and widely available, in the wake of a 2023 price crash. At its peak, battery-grade lithium hydroxide reached $80,000 per metric ton before dropping to $14,000 in April 2024 in the US and Europe. 

The collapse in lithium prices has unnerved investors, creating a challenging funding environment for startups in the space. Furthering the challenge, using DLE to produce lithium still costs more than traditional evaporative pond techniques, though in some cases, DLE is comparable to hard rock mining. But industry advocates say focusing on the current oversupply is shortsighted, and producers need to invest in and scale up novel approaches now to be ready to meet future demand. 

“The smart money is on investing now when resources are relatively cheap to acquire and building capacity that would be coming online in three to five years,” said Raef Sully, chief executive officer of Lilac Solutions Inc., a DLE company backed by Bill Gates’ Breakthrough Energy Ventures and one of the biggest in the space.  (Michael Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg LP, is an investor in Breakthrough Energy Ventures.)

Lilac, which has completed four pilots and two demonstration plants, has raised over $300 million to commercialize its DLE technology that relies on ceramic beads to absorb lithium. It’s currently working to construct a 5,000-ton plant at Utah’s Great Salt Lake, slated to be completed in late 2026. When built, it will be North America’s biggest DLE production facility, Sully said. 

Some are skeptical that Lilac — and DLE as a whole — can deliver cost-effective lithium. The startup’s technology was the subject of a short seller report published in 2022 saying its approach doesn’t work, a claim the company refutes. 

“Investors still have no evidence that the Lilac DLE technology works at scale and if so at what cost,” J Capital Research wrote in its report. “If the DLE technology works then the number of ‘cycles’ for which the extraction medium can be used will be a key cost driver. If the medium can only be used for a few hundred cycles then the costs may be prohibitively high.”

Lithium recovery rates have stayed consistently high across the lab tests, pilots and larger-scale demos, and the ceramic beads used to extract lithium have lasted thousands of cycles, Sully said. 

He’s hopeful that the completion of the Utah plant will instill confidence in DLE. “People are rightly skeptical,” he said. “I think there’s some hesitation for big companies to just walk in and use our technology without seeing it themselves.”

©2024 Bloomberg L.P.