EVs to account for 79pc of lithium demand by 2030

Demand for lithium is expected to surge over the next decade, owing largely to the evolution of the electric vehicles (EVs) market, according to Chile's state mining agency, Cochilco.

This year, demand for lithium has been subdued as the Covid-19 pandemic dented consumption across the globe, Cochilco said yesterday. But the agency expects demand to recover over the next few years and anticipates that combined demand for the metal will be at 1.79mn t/yr by 2030, as compared with 317,000t today — most of which will come from the EVs market.

EVs at present account for 75,000 t/yr of lithium demand, or roughly 24pc of total global demand, Cochilco said. But it expects this figure to rise to 1.42mn t/yr by 2030, or 79pc of total demand, based on forecasts for the growing production of hybrid, fully electric and other vehicles that use lithium-ion batteries. The remainder of future demand will come largely from electronics, energy storage and gadgets such as e-bikes.

EV uptake has grown this year, making up 6.8pc of car sales in Europe in the first quarter, compared with just 2.5pc a year earlier. But the automotive market as a whole has taken a battering from Covid-19 pandemic, with sales falling across the board. But the pandemic remains a short-term risk to growth, Cochilco said, showcased by the fact that Chinese demand has started to pick up, with sales of new energy vehicles growing in July, the first month this year in which they have risen.

Many automakers elsewhere are pushing further into electrification, with Germany's Daimler having entered a partnership with Chinese battery cell producer Farasis Energy earlier this year, BMW signing a long term deal with Swedish battery maker Northvolt and Tesla announcing it will build a 30GWh factory in Texas.

But there are medium- and long-term risks relating to lithium consumption, Cochilco said. These include variations in electric car subsidies, lower taxes on combustion engine cars, lower oil prices and the increasing availability of substitutes such as potassium-ion batteries and hydrogen.

The matter of lithium availability, however, is not in question. Last week, Chile's SQM — the world's second-largest lithium producer behind Albemarle — said it is looking to increase production of the metal over the next five years in order to boost its share of the total market. The two firms already account for 40pc of the total, but SQM aims to sell 150,000t of lithium by 2025, up from the 70,000t it is projecting for this year.

SQM's decision contrasts with that of its competitors, all of which have sought to slow production in light of falling demand and prices. In January, prices for minimum 99.5pc lithium carbonate averaged $9/kg cif China but they have since fallen, with Argus' most recent assessment, on 25 August, putting prices at $6.50-8.00/kg.

In terms of output by country, Cochilco anticipates that Australia and Chile — the two largest producers of lithium — will reduce their global market shares, while the US, Canada and Zimbabwe will increase their levels of production by tenfold. Australia's 48pc share last year would fall to 31pc in 2030, while Chile's would drop to 17pc from its current 29pc.

By Yusuf Khan