While oversupply and low prices have been the main focus in battery raw material markets over the past year, particularly when it comes to lithium, substantial long-term shortages are still expected. Over the next half decade production cuts are likely to continue while long term demand is still set to rise.
The lithium market remains at the heart of the global energy transition, fuelled by the rapid expansion of electric vehicles (EVs) and the rising demand for battery storage. Despite recent market fluctuations, the long-term outlook for lithium remains positive. As nations push for clean energy solutions, lithium’s role in the future of transportation and renewable energy storage continues to strengthen.
The supply-demand gap
Forecasts suggest that lithium demand will eventually outpace supply creating a structural deficit in the years ahead. According to S&P Global, the lithium surplus is projected to narrow to 33,000 metric tons in 2025, down from 84,000 metric tons in 2024, as production cuts begin to temper excess supply.
According to industry projections, global lithium demand is expected to quadruple by 2030, driven by EV adoption, grid-scale battery storage and other technological advancements.
During 2022 lithium prices spiked towards $50,000 per metric ton, driven by this huge forecast in demand. The high prices lead to major mining companies significantly ramping up production before demand was ready to keep up, leading to over-production. Companies may have jumped the gun, but this doesn’t mean lithium’s long-term outlook doesn’t remain strong.
Though more than one million tonnes of mined lithium is expected to be produced in 2024, mined supply will need toreach 2.7 million tonnes to meet projected demand in 2030. The majority of demand is set to be driven by the EV market as automakers set ambitious targets for full electrification over the next decade. The current production cuts won’t last.
Investment in lithium critical
To meet the expected demand, the lithium industry will require hundreds of billions of dollars in investment over the next decade. Market analysis suggests that by 2030, more than $500 billion will be needed to fund the upstream and midstream development of lithium supply chains.
Governments and private investors are already taking steps to secure lithium resources. Automakers such as Tesla, General Motors, and BYD have made significant upstream investments in lithium mines and refining facilities to ensure stable supply.
Tesla has committed over $1 billion to a lithium refining plant in Texas, while General Motors has partnered with Lithium Americas to develop a lithium mine in Nevada.
Courtesy of Matthew Craig at The Market Bull
