Lithium demand soars as Electric Vehicle industry accelerates

A recent report by the International Energy Agency (IEA) forecasts substantial growth in the lithium market, driven primarily by the expanding electric vehicle (EV) industry. The report, part of the Global Critical Minerals Outlook 2024, outlines the significant role lithium is expected to play in the clean energy transition, especially as demand for EVs continues to increase.
An infographic on lithium demand outlook and mining requirements, highlighting the impact of electric vehicles. Includes graphs predicting demand from 2020 to 2050, top three producers in 2030 with maps, key milestones, and a clean energy transition risk assessment detailing high risks such as geopolitical issues and supply disruption.
Source: IEA

Exponential Growth in Lithium Demand

Lithium, a lightweight metal known for its superior electrochemical properties, has become indispensable in the production of high-energy density batteries. According to the IEA, global lithium demand is set to rise nearly threefold by the end of this decade under the Stated Policies Scenario (STEPS). By 2050, the demand is projected to reach an astounding 1,700 kilotonnes (kt) in the Net Zero Emissions by 2050 Scenario (NZE), a tenfold increase from today’s levels. This surge is largely attributed to the rapid deployment of EVs, which are expected to account for approximately 90% of future lithium demand growth.

Battery Technology and Market Dynamics

Currently, lithium-ion batteries dominate the market, fueling the EV industry’s growth. However, alternative technologies like sodium-ion and vanadium flow batteries are emerging, which could slightly alter lithium’s dominance in specific segments. Despite these advancements, the IEA report suggests that lithium-ion batteries will remain the primary technology for the foreseeable future.

Battery storage, which currently represents a minor segment of lithium demand, is expected to grow significantly by 2050. The NZE Scenario anticipates lithium demand for battery storage to rise to 130 kt, over ten times the current levels.

Supply Chain Developments and Challenges

The report also outlines significant developments on the supply side. New lithium mining projects are emerging in countries like Argentina and Zimbabwe, while Australia continues to be a key player with substantial expansions in its mining operations. China remains a dominant force in lithium refining, processing a majority of the hard rock lithium mined globally.

Despite these advancements, the IEA warns of potential challenges. Recent price volatility in the lithium market may deter investments in new mining projects, crucial for meeting long-term demand. Ensuring a diversified supply chain is essential to mitigate risks associated with geographical and ownership concentration.

Future Investments and Technological Innovations

Investments are critical to sustaining the momentum in lithium supply. The IEA estimates that the current project pipeline will require around USD 13 billion for raw material production through 2040, with an additional USD 7 billion needed for high production scenarios. This investment is vital to develop new projects and technologies, such as solid-state batteries, which could open new markets for lithium in metal form.

Implications for the EV Market

For the EV market, the implications of this lithium demand outlook are profound. As the world pushes towards achieving the 1.5 °C climate objective, the rapid growth in lithium demand underscores the urgency for scaling up sustainable mining and refining practices. The EV industry, already a significant driver of lithium demand, must continue to innovate and invest in advanced battery technologies to maintain its growth trajectory.

In summary, the IEA’s report provides a detailed overview of the future role of lithium in the clean energy transition. The exponential growth in demand, driven by the EV industry’s expansion, calls for strategic investments and innovations to ensure a sustainable and resilient lithium supply chain. As the world accelerates towards a greener future, lithium stands out as a cornerstone of this transformative journey.

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