‘Acute’ lithium shortages forecast by 2035, as battery supply chains expand
Lithium supply is set to fall short of demand for the first time by 2030, with the gap set to expand rapidly to 24% in 2035, a new forecast from Boston Consulting Group (BCG) claims.
Released earlier this week, BCG’s report on lithium supply chains looks at the projected rise in lithium demand as the use of lithium-ion batteries grows worldwide, both for large-scale storage applications and for the electrification of transport. It predicts a sharper rise than previously expected, amid the rush to end Russian fossil fuel import use in many geographies, primarily Europe.
The report outlines how 90% of the grid-scale energy storage batteries installed to date have been lithium-ion, predicting that this will remain the most popular energy storage technology for more than a decade despite a scaling-up of less commercially mature alternatives.
Increased electric vehicle (EV) production is named as the other major driver for increasing lithium demand over the next 12 years. BCG estimates that 59% of all cars, vans and other light vehicles sold globally in 2035 will be battery-electric – either fully electric or hybrid with a battery.
“Of course, alternatives to lithium-ion batteries as storage options for vehicles and power grids are in development,” the report states. “For the foreseeable future, however, none of these will offer the combination of cost, weight, and volumetric energy density of lithium-ion batteries. Nor is their production reaching the scale needed for the massive volumes that will be required.”
The report predicts that expanding mining projects and increased recycling will enable global lithium supply to continue exceeding demand until at least 2025, and potentially 2030. However, it states that the most likely case-scenario in 2030 is a 4% shortfall between supply and demand.
This shortfall, BCG forecasts, is likely to become far more severe and become “chronic” by the mid-2030s. It forecasts that supply in 2035 could be 24% lower than demand. The report outlines that “dramatically” increasing production of virgin lithium is unlikely to be possible, using existing mining approaches. This is because it is concentrated in a handful of places and because mining poses environmental challenges such as soil and water pollution.
Regarding the concentration of lithium mines, McKinsey estimates that 98% of all global production in 2020 took place in China, Latin America and Australia. Scenes of pollution from Chile’s Atacama salt flat, and similar locations in Bolivia, Mexico and Argentina, have been in the headlines recently. Because production is so concentrated, the supply chain is vulnerable to disruption, BCG’s report explains.
Some private firms in the US are keen to enter the lithium mining sector, but have faced fierce opposition. Similar stories are also unfolding in Serbia and Portugal. BCG is warning that the discovery of new large lithium deposits will not guarantee new supply, with residents and governments increasingly concerned about the potential environmental impact of extraction.
However, other nations are likely to emerge as new lithium producers, it concludes, due to legislation already in the pipeline. The US Government’s Inflation Reduction Act provides incentives for EVs built locally, but the incentive package is greater for manufacturers using critical minerals from domestic sources of nations with which the US has free-trade deals. BCG also floats the potential of lithium production in Europe and India.
The report also highlights the opportunity for established lithium-producing nations such as China to become leaders in recycling. It spotlights how national governments will need to collaborate with the finance sector, automotive firms, mining companies and waste management experts to expand this nascent market.
“Meeting the explosive growth in demand for lithium products in the coming years poses a host of daunting challenges,” the report summarises, “but these challenges must be met if the transition to renewable energy and the global fight against climate change are to stay on course.”
Earlier this year, through our innovation partnership with Springwise, we covered progress on work to extract lithium from granite quarries in Cornwall. You can read that article here.
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