The global lithium market is facing a supply shortage at the end of this decade amid increased adoption of electric vehicles, and more than $51 billion in investments to meet future demand for rechargeable batteries, according to Benchmark Mineral Intelligence.
“We have to act urgently or we will have serious problems meeting the demand of the auto industry,” Andrew Miller, the company’s chief operating officer, told a seminar in New York on Tuesday.
Raw materials are emerging as a bottleneck in the abandonment of fossil fuels. With some 300 factories that can produce batteries for electric vehicles under development around the world, Miller estimates that 59 new lithium mines and plants are needed. According to Benchmark, in 2030, more lithium will be needed than was extracted between 2015 and 2022.
Undoubtedly, the lithium market will register a surplus in the coming years thanks to the new supply. But it will be in deficit again in 2029 and 2030warns the consultant. According to one of Miller’s slides, “it will take a gold rush of critical minerals to close this gap.”
Lithium, a mining resource that recalls past conflicts in Argentina
lithium prices they’ve been on a roller coaster in recent years. The market soared from the second half of 2021 until the end of last year, after excess supply from the previous cycle limited investments. It then fell in the following months as Chinese buyers sold out. But in recent weeks, spot prices have regained ground thanks to the return of buyers amid signs of recovery in demand for electric vehicles, helping to offset the impact of the new supply.
The price increase of 2021-2022 “it is only a warning sign of what is to come”, Miller said.
As countries compete to secure domestic supplies of the metals needed for electric vehicles, automakers are beginning to embark on mining projects. According to Miller, raw materials will dictate the competitiveness of the automotive industry in the future. “The biggest risks in terms of cost exposure for automakers are raw materials.”
The largest Argentine lithium project began producing
Still, current lithium prices and margins are healthy and supportive of supply investments, Bloomberg Intelligence analyst Sean Gilmartin said at the same event. He predicted an acceleration of the consolidation of the sector in the next three to five years.
The period of big price swings may be over for now, with supplies largely constrained for years to come at a time of ongoing strong demand, said Keith Tauro, head of advanced materials and chemicals at the Americas for Nomura Greentech.