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Introduction
The global lithium market is witnessing unprecedented growth and is projected to grow from $26.88 billion in 2024 to $134.02 billion in 2032. This growth is largely fuelled by burgeoning investments in EV manufacturing, providing key global market insights on future expansion. Notably, the Asia Pacific region, led by China, is fronting this charge, commanding over 58.0% of the market revenue share in 2023, driven by continuous.
Forging a Path Towards Sustainable Batteries
The widespread adoption of lithium-ion rechargeable batteries in electronic devices and electric vehicles has surged due to their high energy density and long lifespan. This demand has increased the utilization of lithium, obtained from various sources like brines and pegmatites. With the growth of electric vehicles and renewable energy storage, global market insights suggest that the demand for lithium-ion batteries will keep increasing.
As the electric vehicle market matures, recycling and reuse of batteries will become crucial for resource conservation and environmental sustainability. This shift towards electrification is a key component of the broader energy transition away from fossil fuels towards renewable energy sources to combat climate change effectively.
Accelerating EV Adoption
The rising trend of strategic investments in lithium supply, exceeding $1 billion in 2023 from major automakers and producers, is exemplified by GM's $650 million investment in Lithium Americas and Albemarle's $110 million allocation to Patriot Battery Metals. These investments are driven by the imperative to secure battery raw materials.
Simultaneously, the electric vehicle (EV) market is expanding, propelled by increasing global EV penetration. As EVs become mainstream, the demand for lithium will further increase, fueled by the necessity for batteries, a substantial component of EV costs.
With the current oversupply expected to decrease as demand continues to increase, lithium prices are anticipated to rebound, reflecting the cyclical nature of the market. The EV surge, propelled by lithium-ion batteries, is reshaping the automotive landscape. Despite initial challenges like high costs and infrastructure limitations, sustainability efforts within the supply chain are bolstering the argument for EV adoption.
While China led global EV sales in 2021 due to subsidies and expanded vehicle ranges, Europe experienced a 66% sales surge between 2020 and 2021, driven by plug-in hybrids and stringent emissions standards. However, EV market expansion remains concentrated in China, Europe, and the US, with other regions trailing behind due to factors such as limited subsidies, inadequate charging infrastructure, and high EV prices.
Tesla maintains its dominance in the EV market, alongside emerging competitors like Hyundai and Kia. Nevertheless, uncertainties persist in the US market due to political factors and tax incentives. Bloomberg Intelligence predicts Tesla and BYD to lead EV sales, with Volkswagen facing a decline. Global market insights from analysts foresee internal combustion engine models retaining prevalence, with Volkswagen’s position weakening as Tesla maintains influence.
Deciphering Lithium Market Volatility: Understanding Current Declines
The drop in lithium prices is primarily attributed to a slowdown in electric vehicle (EV) sales in China and a broader economic downturn in the country. Lithium carbonate prices in China have fallen sharply, dropping 67% year-on-year from a peak in November 2022 to the lowest level in two years. The oversupply of EVs in China is a result of Chinese manufacturers overproducing, leading to excess cathode production rather than idling plants. However, this strategy has backfired, causing losses and a decline in lithium prices instead. It is anticipated that if Chinese new energy vehicle (NEV) sales reach 7 million vehicles in 2025, factory usage could fall below 50%, increasing the risk of producing cars at a loss. Due to this, Chinese refining companies are implementing production cuts or suspensions.
Despite short-term volatility, lithium prices historically fluctuate due to supply disruptions, changing consumer trends, geopolitical conditions, and technological advancements. Major oil and gas companies, like Exxon and Chevron, are showing interest in the lithium industry. Lowry, a private energy company, is exploring investments in lithium assets to support the global energy transition. The rise of Western converters may challenge China's dominance in the lithium market, with Canada positioning itself to contribute to North American lithium requirements. Li-FT Power, a Canadian lithium company, focuses on advancing hard rock lithium pegmatite projects in Canada to meet the growing demand.
Market Outlook
Despite short-term fluctuations, the long-term outlook for lithium remains positive due to its essential role in decarbonization efforts, particularly in electric vehicles (EVs). Global demand for lithium carbonate is projected to exceed 2.4 million metric tons by 2030, with BloombergNEF anticipating a nearly 5x increase by the end of the decade, primarily driven by the rising demand for EV batteries.
However, in the short term, Goldman Sachs maintains a pessimistic view on lithium prices for 2024 due to oversupply, projecting further declines compared to current levels. Initially expecting a market deficit in 2024, analysts now suggest a longer timeline, potentially bottoming out in 2025. Goldman Sachs has adjusted its 12-month price targets downward for China Lithium Carbonate and Asia CIF Lithium Hydroxide. They forecast lithium carbonate at $13,377 per tonne, lithium hydroxide at $14,263 per tonne, and Spodumene 6% at $1,250 per tonne for 2024. S&P Global estimates that lithium prices will stabilize beginning in 2025 as the surplus narrows, followed by a subsequent increase.
Looking ahead, the outlook for the lithium market appears robust, with global battery demand anticipated to surge by over 30% annually by 2030. This surge, expected to culminate in a market size exceeding 4.7 TWh and $400 billion, underscores the pivotal role of lithium in powering the mobility sector, particularly in regions like the EU and US. However, this optimistic trajectory is not without its challenges. Securing raw materials, optimizing industrial processes, and ensuring sustainability remain focal points, with battery recycling and end-of-life battery reuse emerging as critical components in the sustainable ecosystem.
