Lithium - Mind the Gap
The lithium market: supply challenges and forecast deficits
A combination of market forces are currently at play in the battery metals sector, having an inevitable bearing on the lithium market, but it’s not all doom and gloom: there are steps that can be taken to allow industry to secure future supplies and increase the chances of meeting demand amid the forecast growth in the global lithium battery sector.
Safe to say, lithium has done well for itself: as an alkali metal, it’s proved pretty versatile in its various chemistries, playing a key role in many applications, from armour plating to anti-depressants, and – most famously – batteries.
The consequence of lithium’s starring role – along with other critical metals, nickel and cobalt – is that we are now witnessing significant price inflation as the confluence of anxieties over security of forward supply and increasing levels of market speculation have come into play.
But price inflation aside, there is another point of concern: the pending supply gap for these critical metals that are key to the manufacturing of batteries, wind turbines and solar energy installations. Brought on primarily by the global pivot to electrification, the result is mounting pressure and demand pulling on the available resources to achieve Net Zero targets.
So what does this mean for the battery metals sector? For lithium, it means that in Europe alone, manufacturers will need to secure 35x more lithium than is currently required if they are to achieve their ambitions for clean energy. Though this is between now and 2050, reports indicate that they’ll also be faced with a 100% increase in nickel requirements, 35% more copper, and 26x the amount of rare earth metals than is currently needed (report by Belgium’s Katholieke Universiteit Leuven, 'KU Leuven').
In an interview with the Financial Times, Liesbet Gregoir, lead author of the KU Leuven report, said: “Europe needs to decide urgently how it will bridge its looming supply gap for primary metals. Without a decisive strategy, it risks new dependencies on unsustainable suppliers.”
In lithium’s case, that supply gap will ultimately require major increases in the number of new lithium mines being brought into production in order to provide adequate future supply to battery manufacturers by 2030. To put a number on this, the IEA suggests that the equivalent of 50 new mines will be needed to support 2030 lithium demand levels (IEA, ‘Global Electric Vehicle Outlook 2022’).
Whichever way you look at the challenge, the likelihood of a supply crunch has become a significant concern for manufacturers desperate to source adequate supply. For governments too, adopting measures to obtain astable supply remains firmly on the agenda, as countries increasingly look to develop domestic supply and onshore capabilities to reduce their reliance on – potentially unreliable - overseas supply chains.
Given that the development time for a new mining project can take over a decade, the importance of secondary sources of metals has not been lost on industry.
“The growth in demand for clean-energy metals will mean an imminent supply deficit unless we ramp up investment into providing adequate secondary supply and primary supply – both securely sourced – here and now,” says Alex Stanbury, CEO of Technology Minerals.
The KU Leuven report further forecasts that “European primary metal requirements are expected to peak around 2040, after which secondary supply will grow significantly. By 2050, secondary supply can deliver 45-65% of Europe’s demand for most analysed metals, and over 75%for lithium and rare earths.”
With policymakers and industry increasingly embracing the key role that the circular economy strategy could play within the sector, there seems to be a growing consensus that secondary supply has the capacity to reduce the pressure of the supply challenge by progressively feeding more and more recycled key metals into battery manufacturers, before supply chain constraints really take hold.