Lithium Demand & Lithium as an Investment

Lithium demand could increase between 4-20 times the current total world lithium production in the next decade, analyst reports show. For the lithium supply-chain to keep up with battery production pipe-line, many new lithium resources will have to come online.

An electric future & Lithium ion

The world is transitioning towards an electric future, both for transportation and energy storage. During the last couple of years Tesla has become an industry leader, paving the way towards a shift to electric vehicles. Major industrial companies in the transportation industry are right now trying to catch up.

According to Benchmark Minerals 500 GWh worth of batteries were produced worldwide in 2019. DNV Global predicts that the new Tesla Battery Technology presented on Tesla Battery Day enables a much lower production cost, hence a faster transition towards an electric future. DNV predicts the global battery production capacity to be above 4 TWh by 2025, and above 8TWh by 2030, which includes Tesla’s own ambitious goal of 3TWh battery production by 2030.

lithium ion battery


Figure 1 – Battery supply & demand forecast (Source: Benchmark Mineral Intelligence)

The forecasted lithium-ion battery demand by 2030 presented by Battery Mineral Intelligence is more than 5 times higher than the reported production capacity during 2019, not accounting for a potential expansion of battery storage systems.

Global lithium-ion battery demand forecasts:

Why lithium is here to stay

Why will the lithium ion battery be the first choice for EV manufacturers? There are a two main drivers that will make sure that lithium ion batteries is here to stay: 

  1. Advanced Technology: The technology has been developed and industrialized for more than 30 years enabling safer, cheaper and more effective ways of production. 

2. The unique properties of lithium: Lithium lightest metallic element in the periodic table. It is theoretically the one element with the highest energy density capacity, meaning it’s able to store the highest amounts of energy while using the least amount of space – perfect for EV’s. 

2. Investment into the lithium-ion battery eco-system: We’re seeing major investments in downstream development, providing additional security that the technology is here to stay. 

Globally, OEMs have committed hundreds of billions of dollars to electrify their fleets in the coming decade. This is too large a sum to walk away from. 

-Chris Berry of House Mountain Partners in an interview with Investing News Network (INN). 

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The false narrative of lithium supply

Lithium has by some industry leaders been labeled an abundant material, easy to produce and easily obtainable when lithium demand increases. Why is this not correct?

False narrative 1: Lithium is abundant, we can get it everywhere.

Lithium is abundant in geological terms. As one of the lightest materials in our universe, you’re able to find lithium almost everywhere. The material is highly reactive in its pure form, and is found all over the planet in low quantities. As an example, our ocean water has a lithium content of 0.14-0.25 ppm (parts per million).

However, the abundance of the material should not be confused with economic extraction of the material. To make batteries from lithium, you need to produce a high purity lithium product, usually Lithium Carbonate or Lithium Hydroxide. A rule of thumb is: the higher grade ore, the less it costs to extract into a high purity end product. As an example of economic grade, cut-off grades for lithium resources that are in development or production range from 400 ppm (sedimentary deposits) to 69,000 ppm (spodumene hard rock deposits).

False narrative 2: When lithium demand will increase, we’ll simply increase production.

Another false narrative is that when lithium demand will increase, you’ll simply turn the tap to increase the supply volume. There are a couple problems connected to this way of thinking: 

  1. New mines take time to build. A new lithium mine takes 5-7 years to go through necessary stages and receive mining permits before it can go into production.

  2. Each resource project is  unique. Each lithium resource has its own geological composition, which demands individual flowsheets to be configured and verified.

  3. The lithium market very different from other commodities. Lithium is not bought and sold like other commodities. The metal is sold on individual contracts between suppliers and the end users. It is tailored to the specific customer and tested to fit specific requirements. The nature of the lithium landscape & the extensive end-user testing before any deals are put in place, means most OEM’s are hesitant to switch between suppliers.

  4. There is a huge capacity gap from current levels to forecasted lithium demand.  The current production capacity is not even close to where it needs to be by 2030. More on this in the next topic: current lithium supply.

It takes 1-2 years to build a battery plant, but 5-7 years to get a new lithium mine up and running.

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Lithium Demand & current Lithium Supply

The global lithium supply in 2019, was according to S&P about 500,000 tonnes LCE, which was lowered to about 312,000 tonnes LCE in 2020 due to the global pandemic according to Mining.com

Benchmark Mineral Intelligence suggests that the lithium demand will soar to above 2,500,000 tonnes LCE by 2029 (based on their own 2.97 TWh battery production forecast). That is an increase of about 8 times the current production in 2020. To facilitate that amount of lithium, new projects must come online all over the world. 

To invest in lithium projects means that you’re able to take part and invest in the critical underlying supply chain that makes Tesla, Nio and other EV-manufacturers a reality.  

2500 kt
Lithium demand 2029 (LCE)​
312 kt
Lithium supply 2020 (LCE)​

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