Oil supermajor ExxonMobil has unveiled plans to become a “leading producer” of lithium ahead of an expected leap in demand for battery metals – but for pure commodity traders, big moves remain a more distant prospect. 

ExxonMobil announced this week it hopes to begin production of lithium in southwest Arkansas by 2027, having acquired 120,000 gross acres of land sitting above vast mineral-rich saltwater reservoirs. 

The company notes that demand for lithium “is expected to quadruple by 2030” – driven by production of electric vehicles, electronics and clean energy technologies – yet almost all extraction today takes place outside North America. 

“Lithium is essential to the energy transition, and ExxonMobil has a leading role to play in paving the way for electrification,” says ExxonMobil Low Carbon Solutions president Dan Ammann. 

The development makes ExxonMobil the largest oil major to have announced a move into the lithium market. 

In a September paper, consultancy giant McKinsey urged non-traditional market participants to increase investment in metals critical to the energy transition. 

McKinsey noted metals and minerals are “currently significantly underpriced”, but that longer-term demand is expected to far outstrip supply. 

It argued this presents an immediate opportunity for commodity traders and energy companies to offer innovative services, such as supporting increased liquidity, price discovery, risk management and pre-financing. 

There have been signs of change on the production side. In 2021, Norway-based Equinor announced an investment into Lithium de France to boost production from hot saltwater wells, while Texas-headquartered oil and gas provider Schlumberger launched a lithium extraction pilot plant in Nevada. 

The following year, US conglomerate Koch Industries acquired a company specialising in direct lithium extraction technology – the same process to be deployed by ExxonMobil – while Oman’s Occidental Petroleum is exploring opportunities through its subsidiary TerraLithium. 

Export credit agencies (ECAs) are also upping involvement in lithium production. In August, ECAs from Australia, South Korea and the US revealed they were considering providing a US$195mn package of support for a lithium mine in the Australian outback, which is expected to produce 15,000 tonnes of lithium carbonate equivalent per year. 

Deutsche Bank’s head of trade finance and lending for Asia Pacific told GTR last month that “looking forward to where demand is likely to be in 2030 or 2035, you need to make sure your supply of those metals is secure now”. 

But for traditional commodity traders, the picture is different. If short-term supply and demand are both relatively stable, with minimal price volatility, there is little incentive to take a long-term view. 

“If you’re a trader, you’re by nature short-term. You’re taking the market as it is,” says Jean-François Lambert, founder and managing partner of Lambert Commodities. 

“You might anticipate a situation where demand-supply could be really different, but if this is two or three years down the road, what can you do in real time? Traders don’t predicate their business on anticipation; they predicate their business on their sound knowledge of supply and demand requirements.” 

Lambert tells GTR that buyers of metals might opt to build up stock while prices are low – as long as keeping large inventory is affordable – or that hedge funds could take a long position ahead of anticipated future price rises. 

“But this is an investment strategy. This is speculation. It’s not real-life [trading] business,” he says. 

For US companies, there are also questions about the long-term role of the Inflation Reduction Act (IRA), which provides subsidies for companies that invest in lithium mining technologies. 

Speaking at a recent industry event held under the Chatham House Rule, one industry player said: “At some point, the IRA tab will run out, and then what happens to these operations, which are going to be higher-cost? 

“If you’re building conversion capacity in a western environment, it is three times more expensive than in Asia. At some point that catches up with you.” 

And outside the US, campaign groups have raised concerns that the race to secure future supplies of lithium is already heightening the risk of exposure to corruption and environmental risks. 

An investigation by Global Witness, published this week, found that the development of lithium mines in Zimbabwe, Namibia and DR Congo had raised several flags, including potential sanctions evasion, bribery, child labour and harm to wildlife. 

“The mineral supply chains for the batteries that will power the green energy revolution should benefit producer nations,” it said.  

“Instead, they could embed corruption, fail to develop local economies, and harm citizens and the environment.”