The current state of oversupply in the lithium market could potentially be overturned from next year, given underestimated demand from battery energy storage systems (BESS) and electric trucks, according to Singaporean hedge fund management firm Arcane Capital Advisors.
"We think that the supply deficit starts happening from 2026 onwards and then it continues to grow towards the end of the decade", said Arcane's director Lee Yuejer during the Mining Asia conference in Singapore on 19 June. "This is definitely contrary to what people in the market are saying."
The firm forecasts lithium demand in 2030 to reach as high as 4.6mn t of lithium carbonate equivalent (LCE), including 2.4mn t from electric vehicles (EVs), 700,000t from electric buses and trucks, as well as 1.1mn t from BESS. It expects around 1.51mn t of demand in 2025 and 2mn t in 2026.
Market consensus, including even the world's largest battery maker CATL's slightly more optimistic forecast, on the BESS sector size is "way off", said Lee. Arcane, citing its own model, expects the global BESS sector to reach 1.5-2.5TWh by the end of the decade, significantly higher than what it cited as a market consensus of 0.9TWh and CATL's forecast of 1.1TWh.
"BESS is driven by basically solar and wind installations. What has happened in the past with solar is that forecasts of actual solar installations about five years into the future have all been off by a factor of 3-4 times," said Lee.
"And the same thing is happening today," he added, with modelling indicating that BESS installations grow to 1.6-1.7TW by the end of the decade on around 1,600GW of solar installations, with the bulk of the solar installations from China.
Solar and wind installations in China totalled 1,370GW last year, according to major Chinese solar photovoltaic (PV) manufacturer Longi. But China's new solar PV installations could be lower at 215-255GW this year.
China earlier this month also called for a stop to a years-long phenomenon of requiring new renewable energy projects to be equipped with ESS, which contributed to dampening market expectations of lithium demand from the energy storage sector.
"The story for EVs, very simple, no new surprises. [But e-trucks are] something that is absolutely new and this is something that nobody else in the market, in the lithium space, has been talking about," he added.
Arcane's model sees 2.5mn medium and heavy e-trucks sold in 2030, which will come with an average battery size of 340KWh - a few times more than that of a typical EV. Arcane forecasts lithium demand from e-trucks to grow "exponentially", reaching 630,000 t/yr of LCE by 2030, "equivalent to half the entire lithium market globally last year."
"Unsustainable" Chinese supply that entered the market over the past few years has contributed to the lithium price "collapsing", said Lee. But as the market size grows, Arcane thinks Chinese pricing power will be eroded in the coming years as they can no longer easily "come in and flood the market like they did back then".
