Rapid growth in lithium demand has been the primary driver of a 14-fold price surge in the last two years, and a looming supply deficit is set to keep the pressure on global markets.

According to BNEF, lithium prices rose from $5,000/tonne in July 2020 to around $70,000/t in July 2022, as demand increased and supply stalled.

“Raw materials availability is the biggest constraint for the production of lithium carbonate and hydroxide, and the market could face a supply squeeze this year,” the analysts said in a recent note. “The lithium industry could struggle to meet growing demand from EVs unless new projects are ramped up quickly over the next two years.”

It’s estimated that capacity at mine (both spodumene and brines) level will reach around 673,000 t of lithium carbonate equivalent (LCE) this year, against a demand of over 676,000 t. This is likely to sustain the higher prices recorded in the first half of the year, Kallanish learns.

In the long-term, demand for lithium is set to grow the fastest amongst battery metals, increasing over 7-fold between 2021 and 2030. Demand for metals used in lithium-ion batteries is set to increase 50% this year to 4.8 million t, reaching 17.5m t in 2030.

BNEF sees likely “technical supply deficits” of lithium, nickel and manganese this year. It explains that upstream mining capacity is limiting supply for lithium and nickel refineries, while manganese faces underinvestment in downstream sulfate refining capacity.

As battery materials market tightens and commodity prices rise, manufacturers could see a reverse in the declining battery prices trend. In turn, potentially higher battery costs could delay the tipping point for EVs. The industry believes EVs will reach parity with internal combustion vehicles on an upfront cost basis when battery prices reach the $100/kilowatt-hour mark.