In the race towards electrification and the pursuit of cleaner energy sources, the spotlight is firmly fixed on lithium, often referred to as white gold, and the evolving dynamics of the market as battery prices continue to decline. BloombergNEF forecasts that the significant downward trend in lithium prices will persist for the foreseeable future, rendering battery technology economically feasible for global efforts towards decarbonization. Benchmark Mineral Intelligence echoes this sentiment, underlining the imminent expansion of the lithium market fueled by the escalating demand for electric vehicles (EVs).
The decline in lithium battery prices can be attributed to various factors, with a notable example being the 51% drop in the price of lithium iron phosphate (LFP) battery cells in China over the past year, now averaging at $53 per kilowatt-hour (kWh), significantly lower than the global average of $95/kWh last year, as reported by BloombergNEF. This decrease in prices is influenced by falling raw material costs, particularly for the cathode, which has seen a sharp decline in its share of total costs for LFP cells in China. Additionally, the overproduction of batteries in China, surpassing the global demand for EVs, has led manufacturers to reduce prices to maintain their market share, resulting in a decrease in average capacity utilization in Chinese battery plants.
Technological advancements and improvements in manufacturing processes by companies like CATL and BYD have also played a crucial role in driving down lithium battery prices. These companies are heavily investing in research and development, automation, and the establishment of new factories, leading to the rapid introduction of new products into the market.
BloombergNEF’s prediction of sustained low lithium battery prices for the coming years is set to have a significant impact on the automotive and power sectors, with battery technology already proving to be economically viable for the global decarbonization of road transport. The decreasing prices of lithium iron phosphate (LFP) pack prices, now at $75/kWh in China, are making electric vehicles competitive with traditional combustion cars across various segments. This shift is expected to extend beyond China, benefiting commercial EV manufacturers and reducing the premium they pay for batteries.
The rapid decline in lithium battery prices is not only benefiting the electric vehicle market but also holds promising prospects for the energy storage sector. Turnkey energy storage systems are now 43% cheaper than they were a year ago, with global stationary storage installations projected to increase to 155 GWh this year, a 61% rise from the previous year, according to BNEF data. The narrative of perpetual shortages in batteries and battery metals has been challenged by recent developments, with the decreasing prices in China potentially revolutionizing the global automotive market and expediting the transition to renewable energy storage solutions.
The projected expansion of the lithium market in the coming years is highlighted in Benchmark Mineral Intelligence’s Q2 2024 Lithium Market Overview, indicating that the market is on the brink of significant growth. While short-term fluctuations are expected, the long-term outlook suggests a structural deficit as the supply of lithium struggles to keep pace with the accelerating EV revolution. Global lithium demand is forecasted to reach 1.15 million tonnes of lithium carbonate equivalent (LCE) by 2024, with batteries, particularly EVs, driving an astounding 87% of this demand.
Looking ahead to 2030, global demand for lithium is expected to more than double, reaching 2.89 million tonnes LCE, with batteries accounting for 94% of consumption. The rise of EVs is identified as the driving force behind this surge in demand, with every major automaker setting ambitious targets for electric vehicle production. Geographical diversification in lithium mining is anticipated to increase as the market expands, with significant capital investments required to meet the growing demand for lithium chemicals.
Investors are presented with opportunities across various sectors, including lithium producers such as Albemarle, SQM, Ganfeng Lithium, and Pilbara Minerals, as well as battery manufacturers, EV companies, and ETFs focusing on the EV supply chain. The pivotal role of lithium in the clean energy revolution underscores the importance of strategic investment decisions in navigating the dynamic landscape of the lithium market.
Despite recent challenges such as oversupply and lower-than-expected EV sales in China leading to price declines for lithium carbonate, the long-term outlook remains optimistic. Anticipated strong demand rebound with the increasing adoption of EVs globally suggests a potential price recovery from 2025 onwards. The evolving market dynamics underscore the critical role of lithium in driving the transition towards sustainable energy solutions, emphasizing the need for informed and strategic investment approaches in this fast-paced industry.
