Lithium remains a key component in batteries used in electric vehicles, which means automakers, mining companies, and financial institutions need to have some idea of how much it will require in the years to come, as well as its price. The problem is that analysts’ views on these issues vary wildly.
In the last year alone, lithium is up fivefold — the market is divided on whether it will be enough for everyone. EVs and their batteries will become cheaper as production increases, but if commodity prices continue to rise, this process may slow. The auto industry has made its bet – the biggest manufacturers have started the switch to electric vehicles, mining companies and governments are doing everything they can to increase extraction. But extremely high growth rates in demand raise doubts as to whether there will be enough lithium for everyone. Expert opinions vary widely: some predict a 13% supply gap relative to demand in 2025, while others predict supply will be 17% higher than demand. And the demand volumes themselves are still unclear – according to forecasts, they will be between 502,000 and 1.25 million tons by 2025.
The lithium market is still small but poised for explosive growth, which is why expert opinions vary so widely. On average, analysts are forecasting 20% annual growth in supply and demand between 2021 and 2025. – for comparison, such large and mature markets as copper traditionally show a dynamic of 2-4%. Forecasts for lithium are important for all market participants: banks can use it to forecast the entire market, from estimating electric vehicle sales to lending and mining projects, and vague forecasts can lead to large price fluctuations. However, if spot prices (for immediate delivery) remain at the levels currently observed in China, the average price of an electric car could soon rise by $1,000, predicted Benchmark Mineral Intelligence.
So far, automakers have not had much difficulty in getting lithium supplies, since its reserves are quite large in countries with a developed mining industry, including Chile, Australia and Canada. The largest mining companies are in no hurry to switch to the development of lithium – its market is still too small compared to iron ore and copper. The only exception among the big players was Rio Tinto, which was also forced to abandon a costly ($2.4 billion) lithium project in Serbia after public outrage and possible environmental risks, despite the metal itself being used to make green vehicles.
Lithium’s main concern remains its huge growth potential — experts are yet to fully appreciate it, though they tend to believe the risk of a supply shortage still looms. Bank of America, whose forecast was rated among the most optimistic, recalled a scenario where customers are already pressuring partners and mining companies are just beginning to meet their commitments.