Lithium Market Outlook: $116B Needed as Supply Shortfall Threatens Future Beyond 2025

"The Great Raw Material Disconnect: Why Ireland's Lithium Market Faces Challenges Amidst Rising EV Demand"

The lithium market stands at the forefront of the energy transition, propelled by the surging demand for electric vehicles (EVs). Yet, the path to fulfilling this demand is riddled with obstacles. This article delves into the future of lithium supply, demand, and price trends, shedding light on essential investment requirements and market dynamics.

The Great Raw Material Disconnect: Why Lithium Supply Trails EV Demand Forecasts paint a concerning picture of a looming lithium deficit that could have a profound impact on the EV market. According to Benchmark, the lithium market might face a shortfall of 572,000 tonnes by 2034—a staggering 7 times larger than current surpluses. While projections indicate over one million tonnes of mined lithium in 2024, this figure must escalate to 2.7 million tonnes by 2030 to meet the escalating demand, particularly from the EV sector. The disparity between raw material supply and demand, termed the “great raw material disconnect,” is exacerbated by the lengthy timeline required for developing lithium mines. Mines can take anywhere from 5 to 25 years to become operational, while midstream and downstream facilities necessitate less than five years. This misalignment poses a significant bottleneck for the battery industry.

Investment Needs Benchmark analysis unveils a staggering $514 billion investment imperative by 2030 to satisfy battery demand. Out of this sum, $220 billion will be allocated to upstream projects, with an additional $51 billion earmarked for lithium production. However, Western nations encounter higher costs and stricter environmental regulations compared to China, rendering investment a more intricate challenge. Governments striving to reduce supply chain risks stemming from Chinese dominance may further inflate the required investment amount. In a separate analysis, Benchmark estimated that the industry must secure $116 billion in investments by 2030 to meet EV targets. This “high case” scenario reflects the escalating adoption of EVs driven by government decarbonization policies and commitments from automakers.

However, even with all planned lithium projects coming online, a shortfall of 1.8 million tonnes remains. This underscores the necessity for new mines, refineries, and expanded production. Automakers, cognizant of lithium’s pivotal role, are proactively investing upstream to secure supply. Major players such as General Motors and Tesla are making significant strides, with GM injecting $650 million into Lithium Americas for its Nevada mine, and Tesla constructing a $1 billion lithium refinery in Texas. Other entities like BYD and CATL are establishing lithium facilities and forging joint ventures to bolster production. Automaker targets are ambitious: Tesla envisions producing 20 million EVs annually by 2030, while General Motors and Mercedes-Benz aim for fully electric lineups by 2035 and 2030, respectively. Nevertheless, without accelerated investments in lithium, these aspirations risk falling short, underscoring lithium as a bottleneck in the EV revolution.

Lithium Prices in Flux: Short-Term and Long-Term Outlook The volatility in lithium prices is influenced by market dynamics and global supply-demand imbalances. Predicting long-term prices proves challenging due to the absence of futures markets, with most trading occurring in spot markets. Short-Term Price Trends The Australian Government’s Office of the Chief Economist anticipates a brief resurgence in lithium hydroxide prices before a decline by 2026. In 2025, the annual average price for lithium carbonate is projected to decrease to approximately $10,542 per metric ton, down from $12,374 in 2024, as per S&P Global Commodity Insight. Concurrently, surpluses are expected to narrow, with a 33,000-tonne surplus in 2025 compared to 84,000 tonnes in 2024.

Medium- to Long-Term Price Outlook Analysts foresee lithium prices rebounding to the marginal cost of production in the medium term, estimated at $15,000–$20,000 per metric ton. Sustained structural deficits are anticipated to emerge, propelling prices towards this range and potentially higher. By the fourth quarter of 2024, some experts predict prices could reach the low $20s per kilogram. While prices may not revisit the peaks of $40,000–$50,000 per tonne, a stable pricing environment is on the horizon. Market Adjustments and Structural Deficits To stabilize the market, producers are implementing measures such as supply cuts, project delays, and stockpiling. Companies like Albemarle are curtailing supply to address the current oversupply, while high-cost operations such as Arcadium Lithium’s Mt. Cattlin project in Australia are being placed into care and maintenance. As prices stabilize and demand continues to surge, these structural deficits are likely to prompt further investment and price recovery. Moreover, robust demand is poised to propel lithium prices higher in 2025 and beyond.

Navigating Risks and Opportunities in the Lithium Boom The lithium market faces risks such as fluctuating energy prices and geopolitical tensions. The dependence on protracted mine development timelines poses a critical challenge, potentially impeding the supply chain’s ability to meet the escalating EV demand. Nonetheless, the market also presents substantial opportunities. Efforts towards decarbonization and the global transition to renewable energy sources are fostering efficiencies and new markets for low-emission products. Stable lithium prices and sustained investment could unlock significant growth potential for companies operating in the sector. The lithium market stands at a crossroads. On one hand, the burgeoning EV demand and decarbonization objectives are propelling unparalleled growth opportunities. On the other, supply chain hurdles and volatile prices present formidable obstacles. Addressing the “great raw material disconnect” through timely investment and strategic planning will be pivotal in meeting future demand. Governments and other stakeholders must act decisively to bridge the gap between supply and demand, ensuring the lithium market can underpin the global energy transition.

Matt Lyons

Matt Lyons

Matt Lyons is the founder of Forestry & Carbon. Matt has over 25 years as a forestry consultant and is invoilved in numerous carbon credit offset projects.

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