Global Lithium Demand to Soar – But Can it Keep Up with Supply?

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Global lithium demand is surging and there’s little denying the trend will continue for at least the next couple of decades. That’s because lithium-ion batteries are the dominant form of rechargeable battery used in electric vehicles (EVs) with no major competitor on the horizon.

With sales of EVs growing and set to continue growing exponentially, lithium has been a major beneficiary. If lithium bulls have cause for concern it is on the supply side, where growth in lithium-concentrate production has been outpacing demand.

Soaring Lithium Production Raises Supply Glut Concerns

More than 2 million EVs were sold in 2018, up from just a few thousand in 2010, according to BloombergNEF. The research organization is forecasting that annual passenger EV sales will rise to 10 million in 2025, 28 million in 2030, and 56 million in 2040, by which time EVs will account for 56% of light commercial vehicle sales and 31% of medium commercial vehicle sales.

On the supply side, global lithium production grew 17.6% in 2018, well in excess of its 10-year average growth rate of 6.6%, according to the BP Statistical Review of World Energy 2019.

Lithium Production By Country

Source: BP Statistical Review of World Energy 2019

Global Lithium Growth Between 2007-2018

Growth Rate Per Annum 
Country2007-20172018Market Share
Argentina6.6%8.8%10.0%
Australia12.0%27.5%44.0%
Brazil1.1%200.0%1.0%
Chile2.7%6.6%25.9%
China8.5%17.6%13.0%
Portugal3.4%1.3%
US-5.0%1.5%
Zimbabwe10.3%100.0%2.6%
Rest of World-50.0%0.8%

Source: BP Statistical Review of World Energy 2019

From 2008 to 2015, production of lithium, which, aside from batteries, is used mostly in glass and lubricants barely grew. Whereas, between 2015 and 2018 production doubled and prices tripled as EV sales took off.

Lithium Carbonate Per Tonne Pricing

Source: BP Statistical Review of World Energy 2019

Production will continue to soar as miners race to meet the oncoming EV boom, raising concerns of a supply glut. By 2025, the market for lithium concentrate will be worth $19.5 billion, seven times more than in 2020 according to a base-case scenario published in February 2018 by Australia’s Association of Mining and Exploration Companies (AMEC). Morgan Stanley, which previously predicted lithium prices would fall until 2021, is now predicting prices will fall 30% until 2025 as miners achieve lower costs of production and keep the market oversupplied.

The year 2025 is now shaping up as a crossroads of sorts for the lithium industry. By then, demand for lithium is expected to reach 217,000 tons per year lithium metal equivalent, up three-fold from 2020 and six-fold from 2015, according to an average of eight expert forecasts collated by AMEC.

Simon Moores, managing director of Benchmark Minerals, which provides intelligence on the mineral market, noted recently that it takes eight to 10 years to build a lithium mine from scratch and to ramp it up without any problems. All the investment has gone in up to the mid-2020s but the surge in electric vehicle production is coming after that point, he noted.

Australia and Chile the Dominant Lithium Producers

Two new Australian spodumene operations ramped up production in 2017 and five additional spodumene operations ramped up production in 2018, helping Australia overtake Chile as the world’s top-ranked lithium producer, according to the United States Geological Survey. Australia produced 27,200 tonnes of lithium content in 2018, giving it a 44% share of global production, the BP Statistical Review reported.

Two brine operations were responsible for most Chilean lithium production, which hit 16,000 tonnes in 2018, or 26% of global production. China and Argentina accounted for 8,000 tonnes and 6,200 tonnes of lithium output respectively in 2018, while the United States, Zimbabwe, Portugal, Brazil, and Namibia were responsible for the remainder. The U.S. has one producing lithium mine: at Silver Peak, Nevada.

Australia and Chile are likely to battle it out for the foreseeable future given they together account for more than three-quarters of total global reserves. Australian production has grown 12% per year over the last decade, with no end in sight. Chile, with 8 million tonnes in reserves, is seeking to double production to 230,000 tonnes of lithium carbonate equivalent per year by 2023, Mining Minister Baldo Prokurica told a gathering of lithium investors in Santiago in June. The country has not approved a new lithium mine since 2014, but the mining ministry is planning to release new rules to make it easier for developers.

China is the dominant player in refining and processing with 89% of market share, but it is Argentina that is shaping up as the third major player on the production front. Argentina has 2 million tonnes in lithium reserves, one-seventh of the global total. It has 14.8 million tonnes in identified lithium resources, more than any other country, including neighbor Chile, which is second with 9 million tonnes.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Nadav Shemer
Nadav Shemer is a writer, researcher, and analyst specializing in mining, energy, innovation, and consumer finance. While at Mining Journal, he compiled the publication's inaugural list of the world's top 100 mining companies by revenue and reported on visits to mine sites in the U.S., Africa, and Europe. He has also worked at FCBI Energy, where his publications included a series of white papers on decommissioning of North Sea oil rigs and reports on petrochemicals construction costs.

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