Growth in electric vehicle adoption spiking lithium demand

24 July 2018 Authored by Consulting.us

As electric vehicle (EV) adoption continues to rise, demand is shooting up for lithium – an ultra-lightweight metal used to make EV batteries, as well as rechargeable batteries in many consumer electronics. The global lithium market is projected to grow by a CAGR of 9.33% to 2023.

As governments and consumers look to cut fossil fuel emissions, both policy and preference are spurring the growth of the electric vehicle (EV) market – which includes fully battery-electric vehicles (BEVs), plug-in hybrids (PHEVs), and hybrid electric vehicles (HEVs). Consultancy AlixPartners projects that EVs will account for about 20% of the US market, 30% of the European market, and 35% of the Chinese market by 2030. Meanwhile, the International Energy Agency expects EV ownership to rise from last year’s 3 million units to 125 million units by 2030.

In line with EV market growth, demand for a principal component in their all-important batteries – lithium – is expected to grow strongly over the near term. Market research and consulting firm Mordor Intelligence expects the global lithium market to grow by a compound annual growth rate (CAGR) of 9.33% between 2018 and 2023.

Lithium is used in high-energy density rechargeable lithium-ion batteries, mostly used in consumer electronics and electric vehicles. Battery applications are the number one use of the mineral in term of volume and revenue. Li-ion batteries' low weight, high-energy density, and good recharging capabilities without a degrading ‘memory effect’ make them the number one choice for consumer electronics like smartphones and laptops.Growth in electric vehicle adoption spiking lithium demandLikewise, Lithium’s lightweight properties and high electrochemical potential have made it the top choice for EV batteries. And though consumer electronics command the largest share of the battery market currently, EVs are expected to dominate in the near future, according to Mordor.

With long-term projections for heavy market share of the automotive market, electric vehicles are already making strong strides in terms of adoption, especially in China. Mordor reports that a record 750,000 EV units were registered globally in 2016, with 336,000 of those in China – a 45% share. Chinese consumers are especially eager to adopt electric vehicles as concerns over pollution and smog in their mega-cities continue to mount.  As such, EV sales in China were more than double that of the US in 2016.

Countries with natural lithium deposits will see greater incentives for production as demand spurs on higher prices. Chile has the largest reserves of lithium, followed by China with 26% of global reserves. Despite being home to 5% of the world’s lithium reserves, Australia leads in global production, with 33% of lithium supply. China accounted for 10% of global lithium production in 2015, according to the Mordor report. China, Japan, and South Korea are the principal lithium battery producers, occupying a 96% share of battery shipments.

Demand has already been outpacing supply, according to the report. And with current supplies limited, auto firms are locking into contracts with lithium suppliers. According to analysts, since there is no lithium futures market, battery makers – especially for EVs – are scrambling to lock in their prices through long-term agreements.

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