S&P Global Commodity Insights, a renowned financial analysis firm, has recently released a comprehensive report focusing on investments and growth in lithium-ion battery capacity, particularly in the plug-in electric vehicle (EV) sector. As the electrification of the global automotive fleet gains momentum in the decarbonization of the transport sector and the demand for renewable energy storage increases, lithium has emerged as a critical mineral. It is considered the key element in the production of EVs, making it the beating heart of the net-zero movement.
Automakers around the world are shifting away from fossil-fueled vehicles and embracing EVs, which has attracted significant market attention. Consequently, investments in battery capacity are also surging. S&P Global’s report provides valuable insights into the growth potential and challenges associated with lithium-ion battery capacity. Here are the key takeaways from the report:
Lithium-ion Battery Capacity:
The report predicts a steady growth in lithium-ion battery capacity, particularly in the plug-in EV sector. As of the end of the first quarter, global lithium-ion battery production capacity stands at 2.8 TWh (terawatt-hours). S&P Global predicts that this capacity will more than double by 2030, reaching 6.5 TWh. This planned capacity growth will be sufficient to meet the anticipated demand.
Lithium-ion Battery Demand:
The demand for lithium-powered EV batteries is projected to grow annually at a rate of over 22% between 2022 and 2030. The EV transport segment is expected to capture a market share of 93% in 2030, amounting to 3.7 TWh.
Battery Production: Market Leaders:
China will remain the largest producer of lithium-ion batteries, accounting for over 50% of the market share. However, it is expected to lose some of its market share between 2023 and 2030 due to its already high base. Europe, the second-largest market, and North America will also have significant shares, with each boasting 1 TWh of capacity in 2030. Most of the new additions in North America will come from the United States, while Canada has only two ongoing projects.
India’s manufacturing capacity is set to grow by over 700% to 145 GWh (gigawatt-hours) in 2030, up from the current 18 GWh. This growth will position India as the fifth-largest producer, alongside Hungary.
Battery makers in China, including CATL, BYD, and Eve Energy, dominate the global market for lithium batteries. Despite a temporary decline in EV production due to the discontinuation of state subsidies, these EV battery manufacturers remain optimistic about the market’s long-term prospects.
Lithium nickel-manganese-cobalt (NMC) chemistries currently dominate the battery chemistry mix due to their superior energy capacity. However, NMC batteries account for just over 50% of the global market share this year. Lithium-iron-phosphate (LFP) batteries, which are easier to source due to the abundance of lithium across various regions, are gaining popularity. LFP batteries are also cheaper and safer compared to NMC batteries. In the United States, LFP batteries are projected to make up only 20% of the market by 2030, while NMC batteries will account for 50.2%. In Europe, NCM batteries’ share is expected to reach 77.2% in 2030.
Battery Supply Chain and Challenges:
According to S&P Global, establishing the necessary infrastructure, from mines to recycling facilities, to establish the battery supply chain will be a time-consuming process. The report provides estimates for raw and refined materials from 2022 to 2027 by region. As the sector continues to grow, competition for critical materials will also increase. Despite a lithium supply shortage last year, carmakers and traction battery manufacturers with offtake agreements with miners still manage to secure the volume they need. However, the report highlights potential challenges in the global up- and downstream supply chains. Strict sourcing requirements and long lead times for mine development might pose hurdles for battery capacity development. Global markets for many critical materials are projected to face deficits before the end of 2030, which could cause shortages in the supply chain upstream.
The report also anticipates a boost in both regional supply chains and the global battery inventory through recycling. Numerous small companies are working on developing clean technology solutions for battery recycling.
Future Outlook for Lithium-ion Batteries:
S&P Global Commodity Insights suggests that the industry should focus on exploring new deposits in untapped geographies and developing new extracting and processing methods to meet the growing global demand for lithium. The report also highlights the increasing dependence of the United States on imported lithium-ion batteries, with imports increasing by 66% in the first quarter of 2023. Without significantly increasing its domestic lithium supply, the country will become reliant on exporters. To address this, American Lithium Corporation, which owns two of the largest lithium deposits in the Americas (in Nevada and Peru), aims to play a major role in delivering the much-needed supply. As countries strive to achieve their domestic EV targets and transition to clean energy on a global scale, there will likely be a scramble to secure sufficient lithium supplies.