Introduction: Status of the Lithium Market
The lithium market has changed considerably since December’s recap. Here are some of the biggest developments in the lithium sector since the beginning of the year:
- Lithium carbonate prices reached $59,000 USD per ton at the end of last quarter, with prices still increasing;
- Rio Tinto’s $2.4 billion USD lithium mine, set to be the largest one in the world, was scrapped by the Serbian government following environmental protests;
- The Biden Administration will invest $7.5 billion for electric vehicle charging infrastructure and $7 billion for critical minerals supply chains;
- In a comparison of 2021 Q1 and 2022 Q1 EV sales, China increased by 200%, the U.S. by 60%, and Europe by 25%; and
- Mexico has nationalized its lithium resources, with Chile, one of the world’s largest lithium producers, inching closer to following in its steps.
Lithium Demand & Supply
Rising demand for lithium-ion batteries powering electric mobility and renewable energy is behind skyrocketing lithium carbonate prices and is further compounded by the fact that lithium supply chains are struggling to produce enough of the critical element. Experts expect that lithium supply could collapse by 2026, if the extraction and processing sectors are not expanded fast enough. “The consequences of failure to produce enough lithium are potentially devastating. Global investment in EVs has grown faster than any other new-energy sector over the past few years, outstripping even wind and solar power,” explains Bloomberg’s Annie Lee.
This has led to calls from the EV industry to create brine to battery integrated supply chains like those being developed by EnergyX. Lee continues, “If battery makers can’t get enough lithium, it would curb the expansion of clean-energy vehicles, making it harder to meet global emissions targets.” The large investments that were poured into the EV and battery materials sectors in 2021 ($271 billion and $7.9 billion, respectively) need to be increased through 2022 and beyond in order to meet the net-zero goals that global governments are working towards.
Second Half of 2022
What can be expected from the rest of the year?
With battery materials prices soaring and the production of lithium increasing slowly, the second half of the year should yield a flurry of new announcements regarding lithium extraction and processing. Elon Musk’s call for auto manufacturers to become involved in lithium extraction could spur collaboration – after all, acquisitions and mergers within the sector have become more common as companies seek to increase their market share and production power. As governments and companies jostle for position to secure their lithium supply chains, developing markets will be under scrutiny – Bolivia, Mexico and Serbia to name a few. That being said, the potential nationalization of lithium resources in Chile could greatly affect the market and shift investment attention to Argentina and Australia’s established lithium infrastructure.
Direct Lithium Extraction (DLE) technology could begin to make its appearance in brine or geothermal operations, with R&D in the United States and Europe making strides in bringing DLE to market. This technology could also provide a range of benefits to the industry, as a McKinsey report points out, “Direct lithium extraction and direct lithium to product offer significant promise of increasing lithium supply, reducing the industry’s environmental, social, and governance footprint, and lowering costs.” With the need for more environmentally-friendly processing procedures and supply chains, it would be timely for DLE technology to make its first appearance on the market by year’s end.
Conclusion: Continued Growth
The world is shifting gears to rapidly decrease its carbon emissions and adopt clean technology capable of mitigating the effects of climate change. Lithium remains a critical element to this low-carbon future. After a 2021 that saw the lithium industry ramp up operations and investments, 2022 is well on track to beat all records in terms of production, supply, demand, and funding. The first half of the year has highlighted how important lithium is to the sustainable development of global economies, and what needs to be done to secure the continued supply of lithium: integrated supply chains from brine to battery, DLE technology, and the development of lithium extraction infrastructure. With six months left before the end of 2022, expect to see a lot of movement in the lithium sector.