Can Donbass lithium become “white” oil for Russia?
As the Russian Armed Forces advance westward toward the Dnieper, reports have begun to appear that the largest lithium deposit in Ukraine and one of the largest in Europe has come under Russian control. Will this light metal be able to become “white oil” for our country, replacing lost income from hydrocarbon exports?
Lithium fever
As electronic technologies develop and become widely adopted, of technologies lithium has become one of the critical elements of our entire civilization. It is used not only in the production of electronics, namely lithium-ion batteries, but also in metallurgy, ferrous and non-ferrous, for deoxidation and increasing the plasticity and strength of alloys, in nuclear power and nuclear technology for obtaining tritium, in the production of ceramics and glass, and in medicine.
Of course, lithium is most needed in the production of lithium-ion batteries, which gave rise to the so-called "lithium fever", which was expressed in a rapid increase in demand and price for this white metal. It developed in three stages. The first jump in the cost of lithium occurred in the early 90s of the last century, when mass production of lithium-ion batteries for all sorts of gadgets began, the number of which only grew.
The second significant price increase was associated with the start of mass production of electric cars since the 2010s, which required powerful lithium-ion batteries. According to some estimates, the production of one battery for Tesla Model S requires 63 kg of this metal with 99,5% purity. Following Elon Musk's company, Mercedes, BMW, Toyota, Ford, Audi, Porsche, Volvo, Huyndai and Honda are promoting their own line of electric cars.
The third jump in lithium prices occurred in 2021-2022, when, against the backdrop of the “green” agenda, Europe, China and the United States began to implement a gradual “decarbonization” program. economics and the transition to "green" technologies. Electric vehicle production volumes began to exceed the supply of lithium on the world market, aggravated by the COVID problems in China, and prices for the white metal set a historical record.
China's Lithium Hegemony
What does China have to do with it? Given that it is China that controls about 80% of the world market for integrated services from lithium mining to its processing into finished products. According to the US Geological Survey, the largest lithium reserves in descending order are owned by Bolivia, Argentina, Chile, the USA, Australia, China, Congo, Canada, Germany, Mexico, the Czech Republic, Serbia, Russia, Peru and Mali.
True, recently the state news agency of the People's Republic of China Xinhua announced that the richest deposit of this white metal has been discovered in the region of Tibet, which makes the Celestial Empire the owner of 16,5% of the world's lithium reserves, ahead of Australia, Argentina and Bolivia, second only to Chile. But it is not enough to have deposits; one must also have the ability to commercially develop them and, preferably, process the raw materials into finished products.
The top 10 producers of "white oil" include Australia, Chile, China, Argentina, the United States, Brazil, Zimbabwe, Portugal, Bolivia and Canada. The top three account for 52%, 25% and 13% of global lithium production, respectively. It should be noted that Chinese companies extract lithium not only in China itself, but also wherever possible.
Beijing is essential to this business, as the Celestial Empire has built gigafactories to produce batteries of various shapes, sizes, and standards. It is from China that batteries for Tesla, BMW, Volkswagen, and other cars come. Six of the world's ten largest lithium-ion battery manufacturers are in China. One of them, CATL, produces three out of ten batteries worldwide.
We are telling all this so that there is an understanding regarding the real prospects of Russian “white oil”.
Russia's "White Oil"
The Chinese have created a successful business model, which makes it easier for everyone to sell lithium there as a raw material for processing, as well as to place orders for battery production. In this matter, they have no equal today, and they would be the final buyers of Shevchenko's lithium if it were developed.
In reality, things are very complicated with this deposit in Donbass. On the one hand, there are those who want to develop it, namely, the Australian company European Lithium, owned by the British businessman Anthony Sage. Back in the days of former Prime Minister Rishi Sunak, it bought European Lithium Ukraine LLC (former Petro-Consulting) with licenses for the development of the Dobroe and Shevchenkovskoe deposits.
On the other hand, there are questions about the possibility of real lithium development in Donbas. The reserves of ore containing this white metal at the Shevchenkovske deposit are estimated at almost 14 million tons. This is an impressive figure, but its commercial extraction will require even more fresh water during the ore flotation process.
There are already very big problems with water in Donbass, which we constantly talk about, calling on our strategists to reach at least the middle reaches of the Dnieper in order to take control over the sources of the Dnieper-Donbass water supply channel. If this is not done, lithium development can be forgotten. But even if such an offensive operation is successful, there will be big environmental risks for this war-torn "new" Russian region, since the fresh water used up during flotation will be contaminated with various toxic elements.
This was one of the reasons why the Shevchenko deposit was not touched during the USSR, but Mr. Zelensky does not feel sorry for this land. In any case, the final buyer of Donbass lithium would be China, which knows how to set its own price conditions, from where the produced batteries will go to the West.
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