Lithium chemical glut may turn into a pinched market by 2025, Bloomberg analysis says
Energize Weekly, November 6, 2019
The battery demand for lithium chemicals – now in the doldrums – could reach 700,000 metric tons by 2025 and along with 300,000 metric tons for non-battery uses, making for a tight market, according to a Bloomberg New Energy Finance (BNEF) analysis.
Lithium prices have been cut in half since the last quarter of 2017 as the there was a perceived oversupply in the market and major producers are pulling back, BNEF said.
“This boom-bust cycle is not healthy – it breeds more risk and uncertainty for investors,” Bloomberg said. “It reemphasizes why it is so important for the lithium industry to get demand forecasting right and grow supply accordingly.”
BNEF said that a key problem has been faulty lithium supply forecasting, which has used a top-down approach, based on estimating the amount of material needed by tallying how much capacity battery manufacturers planned to bring online.
“The dominant demand consensus amongst lithium producers in early 2018 was that battery demand for lithium chemicals would hit 1 million metric tons lithium carbonate equivalent (LCE) by 2025,” BNEF said.
The problem was that all that capacity was competing for the same demand in a race for market share, so some of it was not going to get built.
Using a “bottom-up” methodology looking at market segment demand, with a focus on electric vehicles (EV), BNEF forecasts that global lithium-ion battery demand will surpass 2,000 gigawatt-hours and 1.6 million tons of LCE by 2030.
While demand for lithium chemicals will reach nearly 700,000 metric tons LCE by 2025 for batteries with another 300,000 metric tons LCE of non-battery lithium demand, BNEF calculates production capacity could be tight.
The Bloomberg 2025 forecast for “de-risked” lithium mining resource capacity in 2025 is 1.3 million metric tons with 915,000 metric tons of de-risked lithium chemical conversion capacity – 45 percent carbonate and 55 percent hydroxide.
“Another aspect of lithium-demand forecasts that has not yet achieved market consensus is the split between lithium hydroxide and carbonate,” the BNEF analysis said.
BNEF projects that increasing adoption of higher-nickel cathode chemistries, particularly in passenger EV batteries, will lead to more demand for lithium hydroxide than carbonate.
By 2030, demand for battery-grade lithium hydroxide will likely reach nearly 1.4 million metric tons LCE, and carbonate demand will reach 218,000 metric tons LCE in 2030.