Taming the Hydra: Funding the Lithium Ion Supply Chain in an Era of Unprecedented Volatility

Abstract

The lithium ion supply chain is set to grow in both size and importance over the coming decade due to government-led efforts to decarbonize economies and declining costs of lithium ion batteries used in electronics and transportation. With forecasts of demand for lithium chemicals alone forecast to grow by three times later this decade, at least $10B USD is needed to flow into the upstream supply chain to ensure an efficient and timely build-out. Significant additional capital is needed for other portions of the supply chain such as other raw materials, cathode or anode production, and battery cell manufacturing. Recent exogenous shocks such as the US-China trade war and coronavirus disease 2019 (COVID-19) pandemic have made securing adequate capital for the supply chain a difficult challenge. Without the steady stream of funding for new mine and chemical conversion capacity, widespread adoption of electric vehicles (EVs) could be put at risk. This paper discusses the current structure of the lithium ion supply chain with a focus on raw material production and the need for and challenges associated with securing adequate capital in an industry that has, to date, not experienced such a robust growth profile.