The lithium sector in the US and Canada is expected to experience potential growth in 2024, despite recent challenges in pricing and demand that have impacted the global industry. Market experts have noted that the long-term outlook for lithium remains robust, although there may be expected issues with rapid transformative changes.
Lithium has become a critical resource for the production of electric vehicles (EVs) and is often referred to as the new oil. The race to secure this resource began last year, with growing demand for lithium-ion batteries in the US reaching a record high in 2023. This surge in demand reflects the increasing interest in EVs and the clean energy transition.
Canada, particularly the province of Quebec, has shown a bullish sentiment towards the lithium and battery sectors. Quebec is focused on establishing a comprehensive supply chain that spans from mining to electric vehicle production. Jean-François Béland, Vice President of Ressources Québec, emphasized the necessity of electrifying cars in a recent interview. He stated, “The demand will be there, whatever happens, because we need to electrify our cars. Lithium and critical minerals are, in the 21st century, what coal was in the 19th century and what oil was in the 20th century.”
According to the S&P Global Commodity report, lithium-ion battery capacity is projected to reach 6.5 TWh by 2030. Lithium is considered the key element in creating EVs and is hailed as the beating heart of the net-zero movement. The demand for lithium-powered EV batteries is expected to grow annually at a rate of over 22%, with the EV transport segment capturing 93% of the market share by 2030.
Amid the fallout from the pandemic and geopolitical tensions, companies are revisiting undeveloped lithium assets, accelerating projects, and exploring new opportunities. National government policies promoting energy transition and regional battery supply chains have also contributed to this development. As a result, construction activities are anticipated to surge in 2024, with various projects planned in Quebec, Arkansas, California, Texas, Nevada, Tennessee, and South Carolina.
For example, Standard Lithium is considering starting construction on a commercial-scale plant for its Phase 1A lithium project in Arkansas this year. The completion of the project’s feasibility study in 2023 was a major achievement, and the company’s CEO, Robert Mintak, stated that their goal is to have project finance completed with a final investment decision in the first half of 2024, followed by a 20 to 24-month build time.
Existing lithium companies, such as American Lithium (AMLI), continue to focus on primary lithium projects, while other entities like EnergySource Minerals are aiming to advance construction activities for their lithium projects in California.
Although lithium prices experienced a dip in 2023 due to reduced demand from the battery and EV sectors, industry forecasts anticipate growth in global passenger plug-in electric vehicle sales by 2027. Industry experts emphasize the expected increase in demand for EVs and their associated components. S&P Global reported that EV sales are projected to surpass 30 million units in 2027. The same market report highlighted a significant drop in lithium prices in 2023, falling from record highs in 2022 of over $70,000 per tonne. This decrease was largely driven by the reduced demand from the battery and EV sectors. However, analysts anticipate that prices will stabilize in the range of $20,000 to $25,000 per tonne from 2024 to 2027. Despite the decline, this pricing level is still attractive for investments, especially with government policies encouraging the EV sector.
It is also worth noting that battery startups are attracting significant investments. These emerging companies have been successful in securing substantial financing rounds during the recent surge of venture capital. The cyclical nature of the lithium industry, coupled with supportive government regulations pushing for the end of combustion engine sales, contributes to the strong appeal for investment in the sector.
The lithium sector in the US and Canada is currently undergoing a transformative period marked by rapid demand escalation, construction surges, and market volatility. While lithium prices have experienced fluctuations due to reduced demand, a resurgence is expected with the accelerating EV market. Canada, particularly Quebec, emphasizes a holistic approach to foster the lithium supply chain, highlighting the mineral’s pivotal role in the clean energy transition.