The future of lithium production in the U.S. is gaining momentum in Arkansas, as companies like ExxonMobil, Albemarle, and Standard Lithium make significant investments in the state.

This comes at a time when global demand for lithium, driven by electric vehicles and energy-storage needs, continues to grow. In 2023, global lithium consumption reached 180,000 metric tons, up from 142,000 metric tons in 2022, according to the United States Geological Survey. But the U.S. produces less than 1% of the world’s supply.

While most of the world’s lithium still comes from countries like Australia, Chile and China, Arkansas could change that. 

The state is home to the Smackover Formation, a geological formation rich in lithium brine.

“Lithium resource quality is really what makes this a great region,” said Wesley Hamilton, CTO and vice president of research and technology at Albemarle, the world’s top lithium producer. “It comes down to two things: the concentration of lithium and the ability to extract it efficiently from the brine.”

Arkansas has long been a producer of bromine, which is extracted from the same brines now being tapped for lithium. The formation holds over 4 million metric tons of lithium, which is enough to power millions of EVs and devices, according to Galvanic Energy. That has attracted a rush of interest from companies looking to capitalize on the formation’s potential.

Exxon Mobil, for example, acquired 120,000 acres in the Smackover Formation in 2023 and aims to start producing battery-grade lithium by 2027. The company said it will produce enough lithium to supply the manufacturing more than 1 million EVs per year by 2030. Standard Lithium, which has operated in Arkansas since 2020, is also expanding its Direct Lithium Extraction (DLE) facility in El Dorado, thanks to a $100 million investment from Koch Strategic Platforms. DLE is touted as a more eco-friendly extraction method, using advanced filters to reduce energy and water usage.

However, the road ahead isn’t without challenges.

DLE technology, while promising, has yet to be proven on a large scale, and lithium prices have dropped sharply from over $80,000 per metric ton in 2022 to around $10,600 today. That’s due to oversupply, slower-than-expected EV growth and new battery technologies, according to Benchmark.

“Lithium prices are falling precipitously, and many standalone lithium companies are not generating the revenues they need,” said Shon Hiatt, director of the Business of Energy Transition Initiative at the University of Southern California. “That volatility is a big challenge for companies trying to scale up.”

Additionally, China controls 80% of global battery cell production, according to the Atlantic Council, raising concerns about U.S. supply chain risks.

Still, companies like Albemarle and Standard Lithium told CNBC they remain optimistic about Arkansas’ potential to become a key player in the global lithium market.

“The United States has to step up,” said Robert Mintak, CEO of Standard Lithium. “We’ve targeted the Smackover formation in Arkansas because we believe it’s the best resource to develop.”

Watch the video to learn more about how Arkansas is positioning itself at the forefront of U.S. lithium production and what it means for the future of the energy market.