Analysts bullish on lithium outlook as supply crunch looms

Analysts are becoming increasingly bullish on lithium’s near-term outlook, amid expectations of a looming supply crunch by early next decade.

Despite recent lower prices, and a widening range of prices and product quality, the outlook continues to be positive for high quality, low impurity lithium products.

From its earlier predictions of a “tsumami of oversupply,” Australia’s Macquarie recently turned bullish on lithium amid automakers’ aggressive push into electric vehicles (EVs).

Macquarie’s change of heart followed a Reuters report that German automaker Volkswagen would need 150 gigawatt hours (GWh) of battery production in both Asia and Europe by 2025, a figure that is seen doubling by 2030.

Volkswagen plans to buy 50 billion euro (A$80 billion) worth of battery cells and has reportedly identified Sweden’s Northvolt, South Korea’s SKI, South Korea’s LG Chem and Samsung and China’s CATL as strategic partners.

With Volkswagen’s plans adding to those of rival automakers including Tesla, Toyota and others, Macquarie now expects 5 million EVs to be sold by 2025 and 10 million by 2030, compared to less than 2 million in 2018.

The implications are for “a wall of demand coming for lithium from the EV sector.”

Such forecasts have added to projections from other analysts of a looming supply crunch for lithium by the early-to-mid 2020s.

In a July report titled “Lithium’s price paradox,” Benchmark Mineral Intelligence pointed to the “increasing possibility of another major deficit in the market by the early 2020s,” given delays in new projects and planned expansions.

“The question in the lithium market is no longer whether spodumene or brine resources will be developed – both are needed to take us anywhere near the growth estimates of the next 2-3 years. The new question is what other channels of supply will be developed to take us close to the demand forecasts for 2025 and beyond,” the consultancy said.

Benchmark Mineral Intelligence’s Andrew Miller has also recently voiced concerns about the need for greater investment in lithium projects to meet the looming supply gap, while also ensuring greater diversity of supply.

“In our models we're seeing a deficit start to emerge around 2023. If you look at the state of where some of these projects are and their timing to come into the market and then the growth of battery production and EVs that's going to drive it,” he told the Mining Journal.

“The one thing we always say is lithium's not scarce, but getting the right type of lithium to market within a reasonable timeframe, economically, and at the right quality battery consumers are going to