Global lithium demand continued to grow strongly in the June quarter 2022, driven by rising demand for electric vehicle batteries, according to the Office of Australia’s Chief Economist.
Despite faltering global economic growth in the June quarter, sales, and production of electric vehicles (EVs) continued their rapid growth trend. Global sales of all types of EVs increased 36% in the year to June 2022 compared with the same period in 2021 – with Chinese sales up 110%, European sales up 6%, and North American sales up 27%.
In China, total EV sales have averaged almost half a million vehicles a month so far in 2022, reaching a peak of 650,000 vehicles in June. Overall, auto production and supply chains in China have now largely recovered from the COVID-19 lockdowns when EV sales fell to just over 300,000 vehicles in April 2022.
The September “Resources and Energy Report” said key global automakers continue to accelerate plans to transition to EVs by developing new product lines and converting existing manufacturing capacity. The global market share for passenger EVs has quadrupled since 2019, with EV sales representing about 9% of the car market in 2021.
Strong underlying demand and EV manufacturers’ declarations of further increases in production, imply that EV sales could reach almost 40% of vehicle sales annually by 2030.
World demand for lithium is estimated to increase from 583,000t of lithium carbonate equivalent (LCE) in 2021 to 724,000t in 2022.
The Report forecast that over the following two years, demand is forecast to rise by over 40%, reaching 1,058,000t by 2024. Asia remains the major source of demand for lithium, despite the spread of new battery manufacturing capacity into Europe and the U.S.
The in-depth study into the market found that global lithium production is rising, but that a significant supply gap remains. It concluded that world output was 546,000t LCE in 2021 and is forecast to reach 682,000t in 2022 and 1,034,000t in 2024.
The reported forecast that this rapid growth – of over 80% in three years – will be met by gains in output by Australia, Chile (via expansions to Albemarle and SQM brine operations) and Argentina (via new and expanded brine operations by Livent, Allkem, and Minera Exar).
However, the report also noted that total supply from mine and brine operations is currently insufficient to meet demand.
“While new lithium projects are being developed, the supply gap will take time to close. Stockpile size is hard to ascertain, with some estimates of four to eight weeks for spodumene. Ongoing tight supply conditions are forcing lithium processors and battery makers to pay record prices,” it said.
Record spodumene spot prices rolling into contract prices
According to the September 2022 Report, shortages of spodumene, lithium hydroxide, and lithium carbonate continue to push spot prices to new records. Spot spodumene concentrate averaged about US$4,720/t in August 2022. This was up slightly from July, representing a ten-fold increase from the US$418/t recorded in January 2021.
Spot prices for lithium hydroxide (delivered to China) averaged US$70,300/t in August 2022, down slightly from the April peak of US$74,688, but still more than eight times the US$7,984 average of January 2021.
“Supply disruptions in August (due to extended power cuts in Sichuan province, amidst an intense heatwave) added pressure to lithium prices in China. Sichuan produces more than 20% of China’s lithium,” the report stated.
According to the office of the Chief Economist, most Australian producers have historically utilized long-term contracts, and therefore prices received take time to adjust to shifts in spot prices.
However, it suggested that high average prices reported by Australian producers indicate spot prices are now flowing more rapidly into contract prices.
Australian Bureau of Statistics (ABS) trade data indicate that average realized prices (which reflect a mix of contract and spot priced exports) have increased strongly so far in 2022, as processors seek to ensure supply is sufficient to meet expected demand.
Spodumene prices are forecast to rise from an average of US$598/t in 2021 to US$2,730/t in 2022, as record spot prices feed through.
The lithium hydroxide price is forecast to rise from US$17,370 /t in 2021 to US$38,575/t in 2022. Prices are expected to peak in 2023 at over US$50,000/t before moderating to average around US$37,600 in 2024.
New global lithium producers stepping on the accelerator
The report noted that several expansions and new projects have been announced in recent months. In addition to ongoing expansions to brine operations in Chile, state-owned mining firm Codelco is undertaking exploration in the Salar de Maricunga, with drilling due for completion early next year.
In Canada, three new lithium projects in Quebec are expected to start production in 2023, with a combined production of over 50,000t of LCE. Looking further ahead, the reopening of the Whabouchi mine, also in Quebec, is expected to add production of 52,500t a year from 2025.
Mexico has created a state-run company to mine lithium after nationalizing lithium resources in April. The company is scheduled to start operations within the next six months. While several companies hold contracts to explore potential lithium deposits, Mexico does not yet produce lithium.
Europe and North America are looking to reduce their dependency on Chinese imports and develop their own lithium production. In August, the U.S. government’s Inflation Reduction Act of 2022 came into effect. The act contains provisions to promote the clean energy transition including significant incentives to purchase EVs.
Demand shortages having wide range of impacts
EV production is demanding high numbers of lithium-ion batteries (LiBs), which are already in short supply. However, this demand will mean that innovative transport projects such as flying taxis and the hyperloop concept will be right at the back of a “lithium battery queue” and will, therefore, not see the light of day by 2030, according to leading data and analytics company GlobalData.
According to GlobalData, current lithium mining development plans are “too little too late” for flying taxis.
GlobalData’s latest Thematic Research report, Tech in 2030 – Thematic Research, reveals that over 27.5M battery electric vehicles (EVs) will be produced by the end of the 2020s, each needing several lithium-ion cells.
It found that while governments are successfully addressing lithium-ion shortages – battery cell production capacity is expected to grow by nearly five times to 5.8TWh in 2030 – this effort will be too little too late for even the least ambitious EV plans, let alone other electric transport ideas.
“Not only will high demand on lithium-ion drive up EV prices, but it will mean new, innovative technologies that also rely on these batteries will be at the back of the queue,” Emilio Campa, an analyst in the thematic intelligence team at GlobalData, says.
“Comparing anticipated EV demand with production capacity of batteries leaves a shortfall of over 2,400Kt of battery-grade lithium. This just isn’t good enough. Work should have started on subsidizing critical metal mining several years ago. If there aren’t enough batteries for EVs, there definitely won’t be any for projects like flying taxis.”