https://www.miningweekly.com

Lithium outlook for next decade ‘very upbeat’ as decarbonisation, electrification accelerate

28th May 2021

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

Font size: - +

The outlook for the lithium sector over a ten-year horizon is very upbeat, amid fast production and demand growth and numerous opportunities across a variety of countries, says research agency Fitch Solutions and Country Risk.

It adds that the backdrop for lithium is “as bright as ever” as the acceleration towards decarbonisation and the electrification of vehicles and energy storage continues.

The sector is also fast evolving and will go through key changes in the coming years, the agency notes, adding that this will be influenced by improving demand and price fundamentals as the market continues to see the emergence of new players across a variety of regions, from a geographical production and consumption perspective, as well as from a competitive landscape perspective.

However, the constant technological advancements in both supply and demand pose risks to the market outlook, Fitch Solutions warns, noting that lithium is now considered a “strategic mineral” which will likely lead to rising government intervention in its production and sourcing.

The lithium supply landscape will, therefore, evolve quickly and dramatically over the next few years, the agency forecasts.

Fitch Solutions forecasts that global lithium production will more than triple from 442 000 t of lithium carbonate-equivalent (LCE) in 2020 to 1.5-million tonnes of LCE by 2030.

Well-established lithium-producing countries will record further growth, while a number of new lithium-producing markets will emerge in the next ten years.

Production growth is expected to accelerate in Australia, which Fitch Solutions forecasts will remain the largest lithium-producing country out to 2030.

Output in the country is set to almost triple over the 2020 to 2030 period based on the agency’s forecasts, while Chile and China will also more than double their output, with production in Brazil anticipated to grow five-fold.

Although Fitch Solutions suggests that Argentina will also record significant growth, output will “only” double.

Amid rising interest, government support and increasing capital dedicated towards lithium projects, a notable number of new lithium-producing countries will emerge and altogether account for a large share of global output, the agency adds, noting that these include mostly developed markets such as the US, Canada, Germany and some other European countries, along with developing countries such as Serbia and Zimbabwe.

Additionally, the upcoming boom in energy storage, of which rechargeable batteries are the dominant aspect driven by the electric vehicle (EV) revolution, will be the growth engine behind the lithium upstream sector, Fitch Solutions says.

It adds that it has based its lithium demand expectations on its automotive team’s EV sales forecasts and that it expects lithium consumption for the EV sector to grow by as much as seven times over 2020 through to 2030, while yearly EV sales will grow from 3.1-million to 21.2-million units.

It is generally expected that the EV sector will account for about 80% of total lithium demand by 2030, compared with between 40% and 45% currently.

Aside from exceptional growth in the EV sales segment, other trends, such as the very likely strong popularity of battery swap stations, mean that the actual number of EV batteries manufactured will exceed the number of EVs sold, Fitch Solutions points out.

Outside of the automotive sector, utility-scale batteries, portable electronics and e-mobility devices (e-bikes) will also contribute to demand, the agency adds, noting that battery-manufacturing location will further drive the geographical demand for lithium.

China is expected to remain the largest battery manufacturer by far for the time being (accounting for about 80% of installed manufacturing capacity as of 2020), but other existing manufacturers including Japan, South Korea, the US and Hungary will most likely record a rise in battery manufacturing, Fitch Solutions says.

It further adds that relatively new entrants, including Germany, Poland, Sweden, France, the UK, Thailand and Indonesia, will also establish themselves as increasingly important manufacturers.

“As part of our expanded coverage of battery minerals lithium and cobalt in 2021, we have launched in May 2021 a new lithium price forecast - for both carbonate and hydroxide - adding on to our existing mineral and metal price forecast portfolio,” Fitch Solutions comments, noting that the agency believes the lithium market will be tight in the next five years, with supply chasing demand.

Fitch Solutions forecasts that both carbonate and hydroxide prices will trend higher, and that a sharp acceleration in demand for lithium-ion (Li-ion) batteries will outpace supply growth, keeping prices elevated.

The agency forecasts Chinese lithium carbonate 99.5% prices to average at $13 450/t this year and at $15 025/t in 2022, and for Chinese lithium hydroxide monohydrate 56.5% prices to average $11 950/t this year and $14 300/t in 2022.

Risks to prices include a faster-than anticipated adoption of EVs (upside risk to prices), a faster-than-anticipated advancement of new lithium extraction technologies (downside risk), and a faster-than anticipated advancement of battery-recycling technology (downside risk).

Another key price trend in the lithium sector is the fast rise of a green premium, amid heightened demand for more environment-friendly resources from downstream players as they aim to improve their supply chain transparency and sustainability, says Fitch Solutions.

It further notes that the increasing demand for the most sustainable lithium, coupled with tight supply, means that over-the-counter transactions, offtake agreements and long-term strategic supply partnerships are here to stay in the coming years.

“This will keep the lithium market opaque to some extent. Lithium will remain more of a specialty chemical market (with clients requiring specific and often differentiated products) and less of a bulk commodity market,” the agency comments.

Technological advancements, meanwhile, are at different stages of development, with Fitch Solutions suggesting that actual supply could rise faster than expected.

Currently, only hard rock and ‘conventional’ brine resources (from salars) are used to produce lithium chemical products commercially at large scale; it is estimated that about 65% of global output comes from hard-rock lithium mines (for example, in Australia), while 35% come from brines (in Latin America and China).

However, Fitch Solutions says that a host of new players are developing new extraction techniques, namely geothermal brines and sedimentary (clay) deposits, which could upend primary supply of lithium.

As the development of these new extraction techniques progress, the structure of the industry, the shape of the cost curves and the environmental, social and governance (ESG) considerations will continue to evolve.

The upcoming development of lithium recycling could also ease some of the lithium supply issues in the longer term.

Contrary to some other battery minerals, such as cobalt and nickel, which are vulnerable to future battery chemistry evolutions as manufacturers aim to develop more efficient, sustainable and lower cost batteries, lithium is used to a large extent in all current batteries as well as those being currently developed.

Further, Fitch Solutions notes that the lithium content of the promising next generation of batteries is even higher than the batteries that will be dominating over 2021 to 2025.

“Although lithium is a critical raw material to advancing decarbonisation strategies, the controversial nature of the sustainability of lithium operations will rise to the forefront of attention. We expect the discussion around the environmental impact of the subsector to focus on two areas, namely sustainability in lithium extraction and Li-ion battery recycling.”

Lithium extraction from salt brines will come under increasing scrutiny in the coming years, and the threat of pollution will result in a persisting risk for social unrest, while as environmental standards tighten around the globe, the proper recycling of Li-ion batteries will be necessary to mitigate adverse ecological impacts.

The repurposing of Li-ion batteries from EVs will also provide upside risk to the battery life cycle, while the collection of lithium from spent Li-ion batteries will also serve as an alternative supply for critical raw materials to conventional extraction techniques. In the near term, the growth of the battery-recycling industry will continue to be limited by cost and policy challenges.

Within this context, Fitch Solutions suggests that more technological advances will need to transpire in the next decade to make recycling a sustainable source of battery-grade lithium.

Another growing key theme in the lithium sector is that of strategic supply, access to this critical raw material and of the growing politicisation of the battery supply chain.

Fitch Solutions says the lithium sector is likely to experience rising government intervention, either to secure this strategic material, boost local production or to benefit from strong fundamentals by raising taxes or control over the sector.

Access to lithium supply is characterised by a number of challenges including the relative geographical concentration and a myriad of key political and sustainability risks.

First, on the supply front, the lithium market is geographically concentrated, both on the upstream front (extraction, dominated by Australia, Chile, China) and the downstream front (chemical processing, dominated by China).

Adding to this market structure are geopolitical risks and the US-China tensions, and Fitch Solutions says the increasingly tense relationship between the West (a rising battery manufacturer and key EV end market) and China (a dominant lithium-processing player and current leading battery manufacturer) raises risks over the resilience of supply chains.

“The ongoing deglobalisation trend and rising efforts to localise supply chains to some extent mean that governments are likely to increase local supply (for example, lithium production in the EU and the US) or to promote long-term supply agreements.”

Lastly, challenging lithium extraction sustainability credentials will also lead to a race by battery and EV manufacturers and even their governments to access the most sustainable raw material, the agency notes.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION