With the electric vehicle (EV) and battery markets powering ahead, forecasters are now tipping that an oversupplied lithium market is entering an undersupply era.
This is particularly highlighted in Europe where increasing green policy decisions are being made, while at the same time, some of the world’s leading car manufacturers are racing to meet growing EV demand.
In a recent online interview, lithium specialist Howard Klein of RK Equity, predicted that Europe would be a significant player in lithium market this year.
“So last year, the entire lithium battery market demand was around 200,000 tonnes, maybe a little more, so Europe on its own, just for EVs, is going to be 1.6 times bigger than the entire global demand last year,” he declared.
Converging views from the analysts
Global management consultant firm, McKinsey & Company, is also bullish on the future for European lithium demand. It believes the EV-battery market represents an opportunity for European players.
Globally, McKinsey estimate that uses – from electric vehicles and backup power, to mobile phones and other consumer products – could increase demand for batteries 17-fold by 2030. It forecasts that, by 2030, batteries could contribute up to US$185B a year in economic value to the global economy.
In that regard it estimated that demand for lithium-ion (Li-ion) batteries will grow to more than 3,500 gigawatt hours (GWh) by 2030, from about 220 GWh in 2019. In its forecast, McKinsey predicted battery-driven powertrains would replace a growing number of internal-combustion engines (ICE) in transportation and support the use of renewables to generate electricity.
The highly regarded, International Energy Agency (IEA) says China and Europe are set to be the leaders in a growing electric car market, where EV sales were tipped account for about three percent of global car sales in 2020.
The IEA said this outlook was underpinned by supporting policies, particularly in China and Europe.
“Both markets have national and local subsidy schemes in place – China recently extended its subsidy scheme until 2022.
“China and Europe also recently strengthened and extended their New Energy Vehicle mandate and CO2 emissions standards, respectively.
“Finally, there are signals that recovery measures to tackle the COVID-19 crisis will continue to focus on vehicle efficiency in general and electrification in particular,” the IEA recently stated in its Global EV Outlook 2020 report.
The IEA also tipped Europe and China to play a key role in light-duty vehicle fleet growth.
“By 2030, the light-duty vehicle fleet (cars and light commercial vehicles) represents the largest part of the fleet of electric four-wheelers, regardless of the scenario. China and Europe lead this deployment, as policies promote electrification,” the IEA suggested.
Global critical material market analysts, Roskill, notes that the European Commission is a leader in developing battery technology supportive policies.
The European Commission recently revealed it is planning to update EU legislation on batteries, delivering its first initiative among the actions announced in the new Circular Economy Action Plan.
The EU says a modernization of the framework is necessary because of different socioeconomic conditions, technological developments, markets, and battery uses.
Roskill observes that the Commission intends to help unlock large-scale investments and boost the production capacity for innovative and sustainable batteries in Europe and beyond in response to the fast-growing market.
Key automotive industry players
One of the key areas driving the rechargeable battery and EV markets in Europe is the growing competition between manufacturers looking for a piece of a very large pie.
Tesla has announced major plans to be a key player in the European market, including its US$1.6-billion Berlin battery plant, which is currently under construction.
Gigafactory Berlin-Brandenburg will be the most advanced high-volume electric vehicle production plant in the world. Starting with Model Y production at launch, Tesla says it will establish original vehicle design and engineering for worldwide markets out of Germany.
According to Tesla, the Gigafactory product technologies and production methods will be cutting edge, developing the most powerful Battery Systems as well as high performance Drive Units and Power Electronics.
One of Europe’s best known car manufactures, Volkswagen, is not taking Tesla’s arrival lying down, tripling its global deliveries of electric vehicles in 2020.
“2020 was a turning point for Volkswagen and marked a breakthrough in electric mobility,” said Ralf Brandstätter, CEO of Volkswagen Passenger Cars.
“Last year, the brand delivered more electric vehicles worldwide than ever before, handing over more than 212,000 electric cars in total (+158% versus 2019), including nearly 134,000 battery electric vehicles (+197% versus 2019).
“We are well on track to achieve our aim of becoming the market leader in battery electric vehicles. More than any other company, we stand for attractive and affordable e-mobility.”
Renault currently leads the total European electric vehicle market sales with 95,985 units sold between January and the end of November 2020, an 80% increase in registrations. The third-generation Renault ZOE is the most-sold electric passenger car in Europe, with more than 84,000 ZOEs sold between January and December 2020.
Where now for Europe?
So where does all this predicted growth in EV demand, and policy changes, leave the lithium market? Another RK Lithium specialist, Rodney Hooper, said there has been an interesting turnaround in lithium market dynamics.
Mr Hooper said that in recent years lithium prices had plummeted on a marginal over supply.
“Now what will they do in an under supplied market? Where are we? We are at the start of a rise in prices to incentivise more production to come. In terms of demand, we are definitely seeing a demand uplift and we are likely to see some kind of a price uplift.”
On the mining front, European Metals (ASX: EMH, AIM: EMH) believes it is particularly well-placed to meet any growth in European lithium demand.
The company is part of a joint venture developing the Cinovec project in the Czech Republic. Cinovec hosts the largest lithium resource in Europe, with a recently completed Preliminary Feasibility Study indicating that the mine has the potential to be the lowest cost hard rock lithium producer in the world.
The company also noted that there are numerous Lithium-ion battery manufacturers who have begun building giga-factories within close proximity to the Cinovec project.
Apart from a small Iberian production for local ceramics and glass use, the European Union currently has no internal lithium supply. As such, they are a major importer of lithium, historically consuming 24% of the global market (second only to China).