Lithium Supply and Demand
- Surge in uptake of lithium-ion batteries in EVs, home/grid storage has caused strong lithium price gains in the past year
- Current demand forecasts for lithium carbonate equivalent (LCE) range from 550 to 600ktpa in 2025, up from 200ktpa in 2016, mostly driven by increase in lithium-ion battery uptakes for storage and EVs
- Total, an oil giant, predicts 30% penetration of car market by EVs by 2030, for 20 million sales. This would require 1-1,200,000t LCE, or 6x current global production
- Morningstar predict 100kt LCE shortfall in supply by 2025
- Supply/demand tightness underpins strong price support forecast
- Global lithium supply is concentrated in relatively few locations; it is dominated by Australian hard-rock production (Greenbushes), and South American brine deposits in Argentina and Chile.
- The market is currently dominated by a small number of companies which control around 50% of supply; Albemarle (ALB US), which owns Rockwood Lithium, SQM (SQM US), FMC (FMC US) and Chengdu Tianqi listed on the Shenzhen Exchange.
- South American brine supply has risks of disruption, both geo-political and climatic. Supply in 2015 was disrupted by increased rainfall. Most recently, SQM’s Atacama core operations lease has been under threat from an arbitration case, where the lessor is seeking early termination of the lease.
- New supply ramp-up has also experienced challenges and delays, such as at Orocobre’s operations in Argentina.
- While new capacity is being brought on stream7, it is likely to be short of the predicted demand growth.
- Hard rock deposits generally have 12 month construction periods; examples of new hard rock deposits coming on stream include Neometals’ Mt Marion project in Western Australia, expected to commence production in 2016.
- Lithium production from other sources, such as clay deposits in Mexico, carry greater developmental risk, but if successful would bring about a welcome addition to supply.
- Future supply diversification to bring new projects on stream in safe jurisdictions around the world is critical to the ongoing “green revolution”.
Factors Driving Demand – Key Points
- Pollution due to fossil fuel emissions kills millions every year8, and greenhouse gas emissions are causing rapid climate change. The world is thus increasingly switching to renewable energy sources, which due to their “peaks and troughs” in power production require cheap, efficient energy storage to ensure smooth delivery to the end-user. This requires rechargeable lithium-ion batteries.
- For the same reasons, an array of major companies, including Tesla, Apple, Google and all the largest car manufacturers including BMW, Nissan & Chevrolet are all betting on the electrification of vehicles, using lithium-ion batteries. The recent Volkswagen emissions scandal, with more such scandals expected in other automotive companies, will only put more pressure on vehicle manufacturers to go electric.
- A fast-growing global middle class is causing an enormous uptake of new smartphones, smartwatches and laptops. These require lithium-ion batteries.
Global EV Sales – a rapid rise
Demand in 2015 – a Snapshot
- Estimated demand 2015: ~160,00ktpa LCE (2014: ~150 ktpa)
- Lithium market ‘value’: ~US$900 million
- Lithium market projected to grow to 500-600ktpa by 20259, which implies a compound annual growth rate of 12-15%pa
Global Lithium Consumption Growth
Projected demand growth in various lithium applications, 2015-2025
7 VSA Capital, 2016
8 World Health Organisation, 2016