Lithium Demand Set to Surge Tenfold by 2050, IEA Report Warns of Supply Challenges

Global – The International Energy Agency’s (IEA) “Global Critical Minerals Outlook 2024,” released on May 17, 2024, projects a dramatic increase in lithium demand, driven by the rapid expansion of electric vehicles (EVs) and battery storage. The report highlights that lithium demand could increase tenfold by 2050 in the Net Zero Emissions (NZE) Scenario, raising concerns about potential supply bottlenecks and the need for significant investments in new projects.

The IEA report emphasizes that lithium is pivotal for clean energy transitions due to its electrochemical characteristics making it ideal for high-energy-density batteries. The EV sector is identified as the primary driver of this demand, accounting for about 90% of future lithium demand growth between today and 2050 in the Announced Pledges Scenario (APS). According to the report, meeting the 1.5 °C climate objective requires a particularly rapid growth in lithium demand this decade, with the EV sector’s annual lithium demand being 40% higher in 2030 in the NZE Scenario than in the APS.

Key points from the IEA report regarding the lithium market outlook include:

• Exponential Demand Growth: Lithium demand is projected to increase almost threefold by 2030 in the Stated Policies Scenario (STEPS) and tenfold by 2050 in the NZE Scenario.
• EVs as Main Driver: The electric vehicle industry is the dominant force behind this surge in demand, accounting for the majority of growth.
• Supply Concerns: The report warns that current supply from announced projects may be insufficient to meet demand in the medium to long term, particularly in climate-driven scenarios like the NZE.
• Price Volatility: The lithium market has seen significant price volatility, with prices plummeting by 75% in 2023 after a period of dramatic increases.
• Investment Needs: Significant investments are needed to develop new lithium projects, with the current project pipeline requiring billions of dollars.
• Geographical Concentration: The report notes that the mining of lithium is concentrated in a few regions, with Australia, Chile and Argentina being major players, while China dominates refining.

The report also highlights that while lithium-ion batteries are expected to remain dominant in the near term, alternative technologies like sodium-ion batteries and solid-state batteries may gradually take some market share. Specifically, sodium-ion batteries may reduce lithium demand in the low-range EV market and battery storage sectors. However, the report states that solid-state batteries are not expected to have a significant impact until after 2030 due to technical challenges. The report also notes that lithium demand for battery storage is expected to rise significantly in the long-term.

The IEA notes that the recent price volatility in the lithium market could discourage investment in new projects, posing a risk to future supply. The report states that the market is currently well-supplied, but continued investment flows are required to develop projects to serve long-term demand and diversification goals. The report also emphasizes that the lithium market structure is sensitive to the respective market shares of different battery chemistries, with growing supply chain segmentation between lithium hydroxide and lithium carbonate.

The IEA also points out that recycling will play a critical role in easing supply pressures, but significant improvements are needed in collection and reprocessing rates. Recycled quantities of lithium could reduce 2040 primary supply requirements by 15%. Without the uptake of recycling and reuse, mining capital requirements would need to be one-third higher.

The report underscores that the future of the lithium market hinges on sustained investments in new projects, as well as advancements in alternative technologies, recycling, and demand-side measures. The market is also influenced by the balance between lithium hydroxide and lithium carbonate demand based on battery chemistry trends, which can significantly impact regional sourcing strategies.

Historically, lithium was used in various applications, such as ceramics and lubricants, but the demand structure has transformed over the last ten years, with batteries becoming the dominant driver. The IEA analysis indicates that the lithium market is at a critical juncture, requiring significant and strategic actions to ensure that the growing demand for this vital mineral can be met sustainably and reliably.