Lithium deposits are most prevalent in South America, particularly in Bolivia, Chile, and Argentina, which together represent over 64% of the world’s reserves. China controls approximately another 26% of the world’s deposits. Currently, production in the lithium market operates under an oligopoly structure, with only a few companies controlling the vast majority of supply. However, new market participants have entered over the last few years as both lithium prices and demand have risen.
Lithium comes from two main sources: brine and hard rock. Brine deposits are found in salt lakes and lithium is extracted through an evaporation process. Brine harvesting is more common and often considered a simpler method of extraction, but generally of lower grade. Hard rock lithium mining requires geological surveys and drilling through rock, which can increase costs, but also often results in higher grades.
Based on production estimates by existing producers, there is expected to be a shortfall in the supply of lithium at least through the rest of this decade. Historically, supply shortfalls in a commodity lead to upward pressure in the underlying resource’s price. Estimates place the world’s lithium reserves at 183 years of remaining supply, but given the time it takes to bring a new project to market, supply and demand forces could push medium-term lithium prices higher.