Can Emerging Industrial Technologies Compete? Scoping the Market Viability of Direct Lithium Extraction in the United States

Frances Fitzgerald and Beia Spiller
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Beia Spiller: Resources for the Future

No 25-16, RFF Reports from Resources for the Future

Abstract: Even as the United States rolls back renewable-energy tax incentives, global investments in clean technologies are rising (IEA 2025). This financial and industrial infusion has the potential to profoundly affect local economies. In rural southern Arkansas, for example, companies are poised to spend billions to extract the region’s lithium, filling the landscape with pipelines and wells while also injecting significant cash into the local economy. At the national level, the implications may be even more consequential; today, US supply chains for batteries—used to power everything from consumer electronics to military systems—depend almost entirely on lithium imports. In many ways, the technology the Arkansas projects plan to use, direct lithium extraction (DLE), represents the promise of a new green industrial economy that could deliver high-tech growth, economic revitalization, and climate benefits all at once.Realizing these benefits will be easier said than done. The lithium market has whipsawed over the past five years, and for every analysis predicting that DLE will reshape global markets (Patel 2023), another warns that its commercial viability is still far from certain (Pedersen and Iqbal 2024). Drawing on conversations with industry experts, company feasibility studies, and project finance modeling, this report provides novel insights into the specific technological, market, and policy conditions that DLE would require to succeed in the United States. We take an in-depth look at three projects in the Smackover region of Arkansas—ExxonMobil’s Saltwerx, Standard Lithium’s Lanxess project, and the Reynolds Unit developed by Southwest Arkansas (SWA), a joint venture between Standard Lithium and Norway’s Equinor—as well as Anson Resources’ Paradox Project in Utah. SWA Reynolds offers particularly strong public data and is thus the focus of much of this analysis.Resources for the Future (RFF) has identified three core challenges to market viability for DLE: price volatility of lithium, technological uncertainty, and macroeconomic factors. Regarding price, we find that lithium prices must rise well above summer 2025 levels, which were around $10,000 per tonne of lithium carbonate equivalent (LCE), See https://tradingeconomics.com/commodity/lithium to make the US projects profitable. Prices are currently in a multiyear trough, having fallen 80 percent since 2023 because of a surge in production in China (Scheyder 2025). However, this is not expected to last: Industry forecasts suggest that prices will rebound to their previous yearly average highs (~$40,000 per tonne) over the next five years, driven primarily by rising global electric vehicle (EV) demand and the corresponding increased need for batteries (IEA 2024). SC-Insights (SCI) projects an average lithium price of around $21,000 per tonne over the next two decades, well above the average of $16,000 per tonne that our modeling suggests most US projects will require to break even.The second challenge DLE must overcome is technological uncertainty. Commercial viability of DLE depends on whether the technology can scale beyond the pilot stage. Although many developers report lithium recovery rates from brine of around 90 percent—a substantial improvement over the 40 to 60 percent from traditional evaporative ponds (Nicolaci et al. 2024) —these figures are based on controlled demonstrations and remain unproven in full-scale operations. More broadly, untested technology increases the risks of capital expenditure and operational expenditure overruns, and our modeling shows that cost overruns can quickly erode the financial viability of these projects, particularly if lithium prices do not fully recover. Finally, macroeconomic factors, such as inflation, high interest rates, or shifts in investors’ risk appetite, pose a risk for project economics. The 8 percent discount rate assumed by most US DLE companies appears reasonable under current conditions, but DLE’s early-stage status may make it particularly sensitive to increases in the cost of capital.If US DLE projects succeed, they could create a new domestic supply chain, generate durable revenue for local governments, and bolster US competitiveness in the global battery economy. If they falter, they may serve as a cautionary tale about the risks of betting on unproven technologies in a rapidly shifting industrial landscape. This report provides novel insights into the specific price points, technological performance levels, and policy ecosystems that DLE will require to compete, and it concludes with a discussion of the broader implications of DLE for the United States and the world.

Date: 2025-10-27
New Economics Papers: this item is included in nep-ene, nep-env and nep-ppm
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