US struggles to secure lithium for strategic stockpile

The U.S. Defense Logistics Agency has pushed back for a second time the deadline for suppliers to bid on a contract to provide battery-grade lithium carbonate for the nation’s strategic stockpile, raising fresh questions about how quickly Washington can secure supplies of the critical mineral.

The latest extension moves the submission deadline to Aug. 5 from July 30. The tender was originally due July 17. The contract is worth up to $300 million and covers battery-grade lithium carbonate for the National Defense Stockpile, part of the U.S. effort to strengthen critical mineral supply chains and reduce dependence on China.

The repeated delays come even as lithium prices have retreated from highs of more than $80 per kg in late 2022. Fastmarkets assessed battery-grade lithium carbonate at $19.25 per kg for delivery to Asia on Wednesday, down about 23% from a mid-May peak of $25.15 per kg.

The revised timetable highlights the difficulty the United States continues to face in translating its critical minerals strategy into physical supply. While Washington has committed billions of dollars to expanding domestic mining, refining and strategic stockpiles, battery-grade lithium remains heavily concentrated in global supply chains dominated by Chinese processing.

Supply options

Potential North American sources include Albemarle (NYSE: ALB), which operates the United States’ only producing lithium mine at Silver Peak in Nevada, and Elevra Lithium (ASX: ELV; Nasdaq: ELVR), whose North American Lithium mine in Quebec produced about 200,000 tonnes of spodumene concentrate last year.

Elevra is expanding the operation towards roughly 338,000 tonnes annually by 2028, although NAL’s concentrate would first have to be converted into the battery-grade lithium carbonate sought by the Pentagon.

Lithium Americas (TSX, NYSE: LAC) is meanwhile building the Thacker Pass project in Nevada, though commercial production remains about a year away.

The Defense Logistics Agency’s proposed contract covers up to 16,167 tonnes of battery-grade lithium carbonate over five years, with deliveries scheduled to several U.S. stockpile depots. The largest volume is slated for the first year as Washington moves to build strategic reserves of the battery metal. The agency didn’t immediately respond Tuesday to a request for comment.

Geopolitics

The tender follows an earlier agency request for information seeking suppliers of lithium carbonate for the National Defense Stockpile. The shift from a market survey to a procurement signals the Pentagon is moving ahead with plans to secure long-term supplies of the critical mineral.

The agency has increasingly turned to strategic stockpiling as geopolitical tensions sharpen and demand for battery materials grows from both civilian and military applications.

The delay also echoes problems the agency encountered with other critical minerals procurement efforts. Last year it postponed and ultimately reworked a tender to acquire cobalt for the National Defense Stockpile after suppliers balked at pricing and contract terms.

Lithium is essential for rechargeable batteries used in electric vehicles, portable electronics and a growing range of defence systems.