As the world transitions to a low-carbon future, the demand for lithium, a critical component in electric vehicle batteries, is surging.
With lithium-ion batteries being the backbone of electric mobility, renewable energy storage, and electronics, the lithium market is poised for a massive growth surge in the coming years.
In this article, we’ll delve into the growth potential of the lithium market beyond 2030, its challenges and how the industry is expected to evolve.
The demand for Lithium will continue to grow for decades
As the world moves towards renewable energy, electric vehicles (EVs), and energy storage systems (ESS), the demand for lithium is skyrocketing. Lithium is the critical component in lithium-ion batteries, and the demand is soaring worldwide.
According to research, the global Lithium-ion battery market size was valued at $59.8 billion in 2022 and is forecasted to reach about $308 billion by 2032, growing at a CAGR of 18.3% (From 2023 to 2032).
This exponential growth is expected to drive the demand for lithium for decades, making it a vital component of battery packs to complement the renewable energy transition. Traditional original equipment manufacturers (OEMs) have also spent billions on developing new models, research and redesigning old factories per the latest business requirements.
Adopting electric vehicles (EVs) is a significant driver making it possible. The International Energy Agency (IEA) predicts that with increasing EV sales, the number of electric vehicles on the road will reach 230 million by 2030, up from 16.5 million in 2022 globally.
Lithium Market’s Current Trends and growth projection beyond 2030
The global lithium market was worth USD 3.64 billion in 2020. It is expected to grow with a projected market size of USD 6.62 billion by 2028 at a compound annual growth rate (CAGR) of 8.1% (2021-2028).
The world aims to achieve net zero greenhouse gas and reduce well-to-wheel GHG emissions significantly by 2050.
The long-term switch from internal combustion engines, or ICE, to plug-in electric vehicles, or PEV, is boosting demand for traction lithium-ion batteries, or LIB.
Lithium-ion batteries are used in EVs, which are expected to replace traditional combustion engines soon. By the end of 2023, the demand for EVs is projected to increase 20-fold, with 34 million EVs in the US. The country’s capacity will rise to 3.4 TWh by 2030, contributing about 54% of the total global growth capacity during 2021-30.
The growth in EV sales is expected to drive the demand for lithium-ion batteries, which will surely increase the demand for lithium.
The factors driving the demand for Lithium in the United States
The demand for Lithium in the United States is expected to continue to grow due to the increasing adoption of electric vehicles (EVs) and energy storage systems (ESS).
With the Biden administration’s focus on clean energy, the government is expected to incentivize the EV market, driving the demand for Lithium-ion batteries.
The strong demand for renewable energy storage systems is also expected to contribute to the need for Lithium. According to a Grand View Research report, Lithium’s market forecast is projected to reach USD 5.88 billion by 2025, with a CAGR of 16.3%.
The demand for Lithium is inevitable. Lithium and its compounds also have many industrial uses, from making heat-resistant glass to lithium grease and from aluminium production to lithium metal batteries.
Lithium-ion batteries are the most common type of battery used in EVs.
The demand for Lithium-ion batteries has been a primary driver of the Lithium market’s growth in recent years and is expected to continue to do so in the coming years.
Lithium-ion batteries are the major contributor to this substantial growth in the Lithium industry and will remain for years. The demand for Lithium will continue to increase, as Lithium-ion batteries are the most common type of battery used in EVs.
In the last two years, spot pricing for lithium carbonate – the most commonly used form of lithium feedstock for batteries – has skyrocketed by an astonishing 400%. This surge in pricing highlights the growing demand for lithium and its importance as a key component in the rapidly expanding battery market.
Lithium-ion batteries are the go-to for electric vehicles (EVs) because of their high energy density, long life, and fast charging capabilities.
Throughout the forecast period (2021-2029), the Lithium-Ion Battery Industry is anticipated to experience a compound annual growth rate (CAGR) of 13.1 per cent, with a total market opportunity of about $52 Bn in 2021 projected to reach nearly $142 Bn by 2029.
As the demand for EVs and other Lithium-ion battery-powered devices continues to soar, the demand for Lithium is likely to follow suit.
- Electric Vehicles (EVs)
The rise of electric vehicles (EVs) in the United States is expected to be the major driving factor for the demand for lithium in 2023. EVs have become an increasingly popular mode of transportation in recent years due to their environmental friendliness and energy efficiency. EVs are powered by rechargeable batteries and produce zero emissions, making them a cleaner and inexpensive alternative to traditional gasoline-powered vehicles.
As technology advances and battery costs decrease, EVs become more affordable and accessible to the general public. Lithium-ion battery pack prices have fallen drastically in the UK & China from $1000 per kWh in 2010 to $100/kWh in 2023. Dakota Lithium batteries, for example, is one of the leading OEM battery manufacturers in the United States, charging between $9 and $10 per Amp Hour of power.
Since Lithium-ion batteries are an essential component of EVs, the demand for lithium will continue to rise.
- Energy Storage Systems (ESS)
ESS are essential for integrating renewable energy sources into the grid storage batteries. ESS helps to reduce the need for traditional fossil fuel power plants and lowers carbon emissions. Lithium-ion batteries are ideal for this purpose; hence, their demand is projected to rise.
- Consumer Electronics
The Consumer Electronics application segment is estimated to grow at 15% CAGR in revenue from 2022 to 2030, according to Grand View Research.
As Consumer electronics have become an integral part of our daily lives, the sales of electronic gazets, such as mobile phones, computers, portable radios, speakers, Mp3 players and cameras, are also rising. These devices have revolutionized how we communicate, work, and access information. With evolving technology, consumer electronics are becoming more powerful, energy-efficient, and affordable. This changing technology is pushing the demand for lithium higher and higher.
- Medical Devices
Lithium is also used in various medical devices, such as pacemakers and implantable defibrillators. With the increasing prevalence of cardiovascular diseases and the ageing population in the United States, the demand for these medical devices is expected to rise, increasing the demand for lithium.
- An additional booster is the Inflation Reduction Act (IRA) of 2022
Joe Biden, the President of the United States, has recently signed the Inflation Reduction Act (IRA) of 2022 to enforce into law.
IRA 2022 is the biggest ever plan in the history of the United States to spend $370 billion out of the total spending of $600 billion on the climate, energy and tax bills alone.
Moreover, the Biden government has made it mandatory to reduce carbon emissions in the United States by about 40% by 2030.
Overall, the Lithium market has enormous growth potential in the coming years, driven by the increasing demand for Lithium-ion batteries in electric vehicles and renewable energy storage. And this will be a promising opportunity for investors looking to capitalize on the growth of this market.
Lithium supply challenges and potential solutions
If the lithium market continues facing supply challenges, it may impact the industry’s growth potential for years.
By far, we know the global demand for lithium will increase in the coming years. However, lithium supply challenges such as limited reserves, environmental concerns, and geopolitical risks make it difficult to meet this demand efficiently.
Bolivia is the largest Lithium reserve in the world, with 21 million tonnes. The United States has the world’s fourth-largest lithium reserves, with 6.8 million tonnes, followed by Chile, with 9.2 million tonnes of the total reserve. India is also about to join the fleet, with the recent confirmation from the Geological Survey of India (GSI) on discovering 5.9 million tonnes of lithium reserves in the country’s northern region.
In terms of production, Countries like China, Australia, and Chile are currently the largest producers of lithium. Still, they are also facing challenges like water scarcity, resource nationalism, and changing regulations.
To tackle these challenges, companies are exploring new sources of lithium, such as geothermal brines and clay deposits, improving extraction and recycling technologies, and investing in battery innovation and energy storage systems.
As the demand for lithium continues to grow, it is crucial to develop sustainable and responsible practices to ensure the long-term availability of this critical resource.
One of the key issues is the limited number of economically viable lithium deposits, which could hinder future production. Lithium mining and processing are resource-intensive and can have negative environmental impacts, leading to increased scrutiny from regulators and environmental activists.
Some potential solutions have been explored to address these challenges.
One strategy is to increase the recycling of lithium from end-of-life batteries, which could help offset some of the demand for new production.
Another approach is to develop new mining and processing technologies that are more efficient and environmentally friendly.
Sustainability and Environmental Concerns
The lithium market faces sustainability and environmental concerns that will impact its growth trajectory in the coming years.
While the demand for lithium has surged due to its crucial role in renewable energy storage and electric vehicles, concerns have arisen over the sustainability of lithium production and the environmental impact of mining.
One of the most prominent challenges is that lithium extraction requires significant water consumption, particularly in regions like Chile’s Atacama desert, due to drought conditions.
Lithium mining has potentially negative environmental impacts, including soil and water pollution. The extraction of lithium from brine can cause saltwater contamination, affecting groundwater quality in that region.
In addition, the geopolitical risks associated with lithium production in countries like China and the likelihood of supply chain disruptions could also impact the market hugely. The production of mined commodities needed for producing renewable energy, such as Lithium, nickel and graphite, is projected to surge 500% by 2050. The World Bank reported. And to achieve this massive goal, they need a massive scale of mining, which means more deforestation. The World Bank said mining is the fourth most prominent driver for 7% of tropical and subtropical forest loss.
As a result, the mining companies are under tremendous pressure from investors, governments and climate activists to address the environmental and social norms by adopting Sustainability Standards. Investors now favour investing in mining companies that adopt better Sustainability Standards.
The Global Investor Commission on Mining 2030, which was recently established, has announced its plan to introduce sustainability standards by January 2024.
The Commission aims to address various mining-related concerns, such as waste management, biodiversity preservation, child labour, and the role of minerals in fuelling conflicts. These issues are on the agenda of the Commission as it seeks to promote sustainable and responsible mining practices.
The increasing demand for lithium has also led to concerns about social and economic impacts on the communities where lithium is mined. Therefore, it is essential to develop sustainable mining and processing practices that minimize the environmental impact and ensure social and economic benefits for the communities.
However, companies in the lithium industry are taking steps to address these challenges, such as exploring new production technologies and improving sustainability practices. These ongoing concerns remain a significant factor to monitor as the lithium market grows.
Emerging technologies and their potential impact on lithium demand
Several noteworthy emerging technologies could impact the lithium market. Technological innovation and the potential addition of new mining and refining capacity are expected to enhance the production of this valuable commodity.
Emerging battery technologies can transform the lithium market and its growth potential in the future.
One of the most promising emerging technologies is solid-state batteries, which use a solid electrolyte instead of a liquid one, making them safer and more energy-dense. Solid-state batteries are being developed that could offer higher energy density and improved safety compared to current lithium-ion batteries, which could increase demand for lithium.
Another technology that could impact the lithium market is sodium-ion batteries, which use sodium instead of lithium as the active ingredient, making them cheaper and more abundant. Flow batteries, which store energy in liquid electrolytes, could also have applications in large-scale energy storage, reducing the demand for traditional lithium-ion batteries.
Furthermore, lithium-sulfur batteries are being researched for their potential to offer even higher energy densities, although commercialization challenges remain.
Finally, there is growing interest in exploring alternative lithium sources, such as geothermal brines and seawater, which could offer new production opportunities.
Another area to consider is the battery recycling sector. Recycling lithium batteries is a complex and expensive process that relies on various factors, including battery design, process quality, and shifts in market supply or raw-material demand. Moreover, operational challenges, such as limited access to battery materials, inefficient processes, and low yields due to immature technologies, continue to pose significant obstacles in the recycling sector.
While the technologies are still in the early stages of development and commercialization, their potential impact on the lithium market is significant. With the growing demand for energy storage solutions, new technologies will contribute to shaping the future of the lithium market and provide new investment opportunities.
Future Opportunities and Risks beyond 2030
As we look ahead to the market growth of Lithium beyond 2030, there are both opportunities and risks to consider.
On the one hand, the increasing demand for lithium in applications such as electric vehicles and renewable energy storage indicates a significant growth opportunity for the industry and volatile lithium prices. According to a report by Research and Markets, the global lithium-ion battery market is projected to reach $129.3 billion by 2027, with a compound annual growth rate of 18.0% from 2020 to 2027.
On the other hand, there are potential risks, such as geopolitical tensions impacting lithium supply chains and possibly new technologies disrupting the current lithium-ion battery market. However, with continued advancements in lithium mining and production technologies and potential new lithium applications in emerging industries, the future looks bright for this critical resource.
The transportation sector, particularly EVs, is expected to account for most of the demand. The increasing demand for renewable energy systems is also expected to contribute to the growth of the lithium market.
However, there are also challenges associated with the growth of the lithium market, such as sustainability and environmental concerns and supply chain challenges.
Therefore, it is essential to develop sustainable mining and processing practices and a robust supply chain to meet the increasing demand for lithium.
Lithium is set to have a bright future with enormous potential investment opportunities.
Investors should closely monitor the lithium market and emerging technologies as they present exciting growth opportunities.
In summary, the lithium market’s growth potential beyond 2030 is significant, but it’s essential to stay informed and aware of potential risks and opportunities to make informed investment decisions.