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  • Steven Roy

Follow the Lithium - Part 5

Updated: Jan 20

Most Likely Future Lithium Global Supply-demand Scenario

Summary: Exponential global demand growth will outstrip linear supply growth, eventually inducing significant shortages - even if geopolitics and ESG concerns can be remediated.

Near- and long-term Lithium supply-demand conditions will be derived, almost entirely, from rising end-user demand for Electric and Autonomous Vehicles (EAV), Stationary Ground Storage, and those technologies’ role in climate remediation and military strategies.

For the last decade, steadily improving performance (including reduced weight/power relations) and the falling cost of lithium-ion batteries has driven adoption of electric and hybrid vehicles and facilitated grid energy storage. During that period, battery production became the predominant determinant of Lithium demand in the global economy – generating 71% of recent global demand.

Barring major changes in public policy, consumer attitudes, or battery-power technology that trend will continue: Globally:

  • Global Lithium demand will grow 5 to 10-fold(500% to 1,000%) between now and 2030, *1 and as much as 25-fold (2,500%) between 2022 and 2050. *2

  • Existing and planned lithium production, supply, and processing capacity will be sufficient for projected needs for the next three to five years. Supply prices should stabilize, albeit at high levels, over that interval.

  • Exponential increase in demand, countered by linear supply increase, will produce materials shortages (and consequent price instability) by 2030. Global 2030 lithium demand will exceed supply by approximately four percent (~100,000 metric tons of lithium carbonate equivalent) (the processed form of raw lithium).

  • By 2035, the global Lithium supply gap will become acute— approximately 1.1 million metric tons, or 24% of projected demand.

  • Recycling will not play a major global supply role until early or mid-2030s due to battery longevity, incompatible battery designs, and repurposing-reuse of existing stock that reduces available recycle materials and overcomes economies of scale.

  • Li and Lithium based materials will remain the primary storage media for mobile systems. Shortages may drive research or adoption of alternative power storage technologies for ground storage applications (e.g., Na and Si based storage).

  • Geopolitics, particularly efforts to reign in China will prompt a “localizing effect” – development of local sourcing to reduce dependence on China influences.

  • Major Electric Vehicle and power system manufacturers will consolidate existing supply chains – either by directly engaging in extraction activities or (more likely) by securing long-term supply agreements. *3 This may consolidate the vehicle manufacturing segment of the industry – eliminating small and undiversified competitors.

Our next installment covers U.S. Domestic Lithium Supply-Demand and Public policies that respond to it.

*1 Zhou Y, Gohlke D, Rush L, Kelly J, Dai Q. Lithium-Ion Battery Supply Chain for E-Drive Vehicles in the United States: 2010–2020. Argonne National Laboratory. 2021; ANL/ESD-21/3. Page xv. *2 International Energy Agency, World Energy Outlook for 2022. Earlier IEA studies forecast greater acceleration but did not adequately reflect technology improvements or anticipate consumer behavioral changes. The IEA reports forecast demand based on the market’s ability to achieve climate change goals, including carbon neutrality by 2030. As such, IEA’s forecasts may not reflect evolving market sentiments, but represent an extrapolation from conditions needed to achieve climate objectives. IEA’s current study is broadly consistent with, but somewhat more pessimistic than, forecasts that rely on more traditional econometric methods.

*3 As prelude to this process, TESLA and Piedmont Lithium Inc. have entered into an agreement whereby Piedmont will deliver 125,000 metric tons of spudomene concentrate (SC6) to Tesla between 07/2023 and 12 2025.

These blogs are an outgrowth of Cambyses Financial Advisor’s Electric and Autonomous Vehicle Initiative. Articles are not an endorsement of any product or producer we mention in the article. They are not an offer to buy or sell any security. Investments in EAV sector companies are very risky and highly speculative. Consult your financial advisor for more information about the companies we mention.

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