With the global desire to reduce C02 levels picking up pace, so too is the worldwide hunt to find and produce lithium.
Known as “white gold” in some circles, the search for the highly desired critical metal has revived memories of historic gold rushes from centuries past.
Lithium supply gap closing as global production ramps up
According to new data from the Office of Australia’s Chief Economist, world lithium output was 737Kt lithium carbonate equivalent (LCE) in 2022, is estimated to reach 964Kt in 2023, and 1.167Mt in 2024.
The latest Australian Government Resources and Energy Quarterly report said this rapid growth is forecast to be met by gains in output by Australia, Chile (via expansions to SQM and Albemarle brine operations), and Argentina (via new and expanded brine operations by Allkem, Livent, and Minera Exar).
Over a five-year outlook, key countries for added lithium supply include China, Brazil, Canada, the Democratic Republic of the Congo (DRC), Mali, and Zimbabwe.
“The large supply gap evident over the past two years is expected to narrow, as additional supply from mine and brine operations in Australia and overseas comes online. However, prices are likely to remain volatile, given the immaturity of the lithium market and the potential for shortages — due to low lithium stockpiles,” the report found.
“While stockpiles remain hard to ascertain — with some estimates of an average of four to eight weeks for spodumene for hydroxide refiners — some refiners may have allowed stocks to run down in recent months, in order to minimise purchases of spodumene at recent high prices.”
World demand for lithium is forecast to increase from 814Kt of LCE in 2022 to nearly 1Mt in 2023.
Demand is then projected to more than double over the next five years, with estimates reaching over 2Mt by 2028.
Price powering up
The Australian Department of Industry, Science, and Resources quarterly report predicts that spodumene prices could rise to an average US$4,350/t in 2023, up from last year’s average of US$3,110/t in 2022. Prices should then temper to US$2,760/t in 2024 and $2,440/t in 2028.
Lithium hydroxide prices are expected to lift from US$44,090 in 2022 to US$61,520 in 2023, before moderating to US$36,220 by 2028.
World demand
The Office of the Chief Economist study also stated that the global electric vehicle market continues to drive up lithium demand.
It found that demand for lithium batteries accounted for nearly 80% of all lithium use last year. This is expected to reach 90% by the end of the outlook period, as electric vehicles (EVs) gain market share in the world passenger car market.
“EV uptake continues to be driven by a combination of falling EV prices, rapidly widening choice of models, and ongoing government measures (although government incentives are being wound back in some countries),” the report said.
“Global sales of all types of passenger-EVs rose by more than 40% in 2022 — with growth in the Chinese market accounting for around three quarters of global growth. Growth in sales in other markets, including in Europe and North America, also increased, albeit at more modest rates.”
The study found that robust EV sales growth in over the past year was still achieved despite a multitude of market challenges. Surging prices for lithium and other battery raw materials (such as nickel, graphite, and cobalt) have pushed up battery costs, in turn putting upward pressure on EV prices.
After more than a decade of declines, some estimates find average prices for lithium-ion battery packs increased to about US$150/kWh in 2021, or seven per cent in real terms.
Further, the supply chain issues that plagued EV manufacturers and battery makers between late 2021 and early 2022, have moderated but remain a major impediment to increased production. Delivery timeframes for some EV models continue to be delayed, with select models being pushed out to next year.
“The global market share for passenger EVs has increased fivefold since 2019, with EV sales representing about 14% of the car market in 2022. Strong underlying demand and EV manufacturers’ declarations of further production increases imply that EV sales could reach about 40% of vehicle sales over the next decade,” the report found.
“As the EV industry continues the move from start-up to scale-up, global supply chains must be developed. This includes battery and cathode plants, as well as lithium refining facilities. Supporting infrastructure — including charging station networks and service industries — will need to be built up. Underpinning all of this will be substantial growth in resource projects, to provide the required lithium and other critical minerals.”
The study concluded that the EV industry will need a “substantial investment” and skilled technical knowledge in order to improve its current situation. The economic, logistical, and technological challenges that it faces are likely to create periods of over- and under- lithium supply (and other critical minerals) over the next five years.
New mines to help meet demand
The March Quarterly Report found that the strong demand outlook for lithium chemicals is attracting capital to build a global supply.
“Several expansions and new projects have been announced over the past year, with exploration and drilling activities picking up in many countries over recent months. A key supply trend that has re-emerged is direct shipped ore (DSO) — with shipments of DSO from assets in Namibia and Core Lithium commencing in the latter half of 2022,” it said.
“Record lithium prices allow miners to sell DSO with lithium concentrations as low as one to two per cent for prices well above what a six per cent spodumene concentrate sold a few years ago.”
However, the report cautioned that “absorbing DSO into the supply chain will result in challenges for Chinese producers, who first need to concentrate the ore before it can be processed in lithium refineries.”
“Market analysts note that if the practice of selling DSO continues when prices decline, stocks may build up again in China, putting further downward pressure on spodumene prices.”
