A highly experienced stockbroker once said that “finding lithium in a mining project in Australia is a bit like having a belly button – everyone has one.”
Leading electric vehicle (EV) manufacturer, Elon Musk of Tesla fame, was recently quoted as stating that there is more than enough lithium in the world to meet market demand – it is refinery capacity that is the issue.
Creating additional mining capacity is also seen as roadblock for both the lithium and EV sectors.
One recent report suggested the world would require 74 new lithium mines with an average size of 45,000 tons by 2035.
Billions need to be spent to meet EV demand
A new study by Benchmark Mineral Intelligence has estimated that US$51 billion (A$76.3 billion) will have to be invested in the lithium sector to meet future demand.
The Benchmark report, “Financing the Battery Arms Race: The Cost of Bridging the Global EV Supply Chain Divide” concludes that lithium production is the biggest bottleneck for the growth of the battery industry.
The company has forecast that more lithium will be needed in 2030 than was mined between 2015 and 2022.
It also suggests that demand for lithium ion batteries (LiBs) will grow to 3.7 terawatt-hours by 2030, up from around 1 TWh this year – led by booming EV demand.
Australian report agrees
Australia’s Department of Industry, Science and Resources (DISR) agrees. In its most recent Resources and Energy quarterly, the department said demand for lithium batteries accounted for almost 80% of all lithium use in 2022.
It forecast this will reach 90% by 2028, as EVs gain further market share in the world passenger car market.
The DISR found that global market share for passenger EVs has increased fivefold since 2019, with EV sales representing about 14% of the car market in 2022.
It suggested that strong underlying demand and EV manufacturers’ declarations of further production increases, imply that EV sales could reach about 40% of vehicle sales over the next decade.
Australia to benefit
Australia is currently the world’s largest lithium producer. DISR says that in 2022–23, Australia’s export earnings are forecast to more than triple — from $5.3 billion in 2021–22 to $18.6 billion.
DISR forecasts that by the end of 2024, Australia could have up to 10% of global lithium hydroxide refining capacity, rising to over 20% of global lithium refining by 2028.
However, it also found that there are a number of risks to those forecasts.
These include approval and construction delays for new mines and processing plants and difficulties achieving ramp up to full output.
There are also technical challenges associated with achieving the required product grade, purity and consistency, which could delay output and exports.
Massive global critical minerals spend needed
According to Benchmark, US$220 billion (A$329 billion) – with nickel and lithium accounting for over half of the figure, will be needed to be outlaid to meet critical raw materials demand.
“The energy transition is still in its early stages and massive capital deployment is going to be needed in order to meet the goals of industry and policy makers,” Andrew Miller, Benchmark’s chief operating officer, said.
“Energy storage might form a relatively small piece of the overall financing required, but it is a strategically critical piece of the puzzle. Batteries are the platform technology for clean energy goals, so financing these supply chains is at the heart of the race towards net zero.”
Lithium prices on the rise
While lithium prices have been hard to follow in recent years, most analysts are forecasting the metal’s value is on the rise.
Leading global energy research firm, Wood Mackenzie, is forecasting that the price of battery-grade lithium hydroxide will average about US$33,000 a tonne (A$50,000), in 2023 dollars, over 2035-50.
That compares to an average price last year of about US$51,000 (A$76,000) a tonne, in 2023 dollars.
Wood Mackenzie expects total lithium demand in 2050 to be about five times what it is this year.
“The idea, held by some in the oil industry, that lithium supply constraints will prevent sustained growth in EV sales seems not to be supported by the evidence.”
Investment is coming
The International Energy Agency (IEA) notes that the mining sector is doing its part to invest in critical minerals developments.
Thanks to high prices and growing policy support (eg. the US Inflation Reduction Act and the EU Critical Raw Materials Act), the IEA says many mining companies are increasing their investment in critical mineral development.
“We have assessed the aggregate investment levels of 20 major mining companies that have a strong presence in developing energy transition minerals. Following the 20% increase in 2021, investment spending recorded another sharp uptick of 30% in 2022,” the IEA recently reported.
“Companies specialising in lithium development increased their spending by 50%, followed by those focusing on copper and nickel development. Companies in China almost doubled their investment spending in 2022.”
“Exploration spending also continued its upward march in 2022, largely driven by the record pace of growth in lithium exploration, followed by copper and nickel. Canada and Australia led this growth, especially in hard-rock lithium plays, but activities are also growing in Africa and Brazil.”
Australia and Canada powering ahead with lithium exploration
It is hard not to note that Australian miners are making a significant investment in the hunt for new lithium reserves.
On a daily basis new lithium exploration campaign announcements are being lodged on the ASX.
There has also been a notable focus switch to lithium exploration by tech and even precious metal companies.
Australian miners have also honed in on the push by the US and Canadian governments to develop “home-grown” lithium production, with a string of juniors heading to James Bay in Quebec in particular in a hunt for the metal, commonly known as “white oil” by many in the resources sector.
The DISR agrees that Australian businesses are expected to continue their expansion into higher value-added activities over the five-year outlook period.
It identified potential avenues to include moves up the battery value chain, from mining and refining into precursor chemicals for cathodes, electrolyte production, battery anode plants, battery cell research and battery manufacturing.
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