EV Growth Challenges Global Lithium Supply Chain
Electrification stands as a crucial means for emission reduction in the energy sector, according to the International Energy Agency (IEA), facilitating a transition from liquid and gaseous fuels to renewables.
This shift is primarily driven by the surging sales of EVs and the global policy shift to phase out petrol and diesel cars.
Consequently, the demand for lithium-ion batteries, pivotal to powering these vehicles, is experiencing rapid growth.
This increased need is exerting substantial pressure on worldwide lithium resources.
Questions arise regarding the volume of lithium required and whether the current pace of mining, refining and recycling can meet the looming demands effectively.
The EV-driven lithium surge
Lithium remains an indispensable element for lithium-ion batteries powering EVs.
In 2024, the global requirement for these batteries surpassed 950GWh, with over 90% of lithium consumed directed towards battery production, as stated by the IEA.
Such high demand translates to each EV battery needing approximately 8 kg of lithium.
Dr Fatih Birol, Executive Director of the IEA, says: “In a world of high geopolitical tensions, critical minerals have emerged as a frontline issue in safeguarding global energy and economic security.”
By 2030, projections by the World Economic Forum (WEF) indicate that the yearly demand for lithium could triple from 2022 figures, reaching three million tonnes of lithium carbonate equivalent (LCE).
This anticipated growth correlates directly with the expected surge in EV sales as more countries transition away from vehicles powered by internal combustion engines.
A regional breakdown
Demand for lithium will be predominantly led by major automotive markets:
- China is estimated to require 1.18 million tonnes of LCE annually by 2030.
- Europe may need roughly 718,490 tonnes.
- The United States will probably demand around 627,772 tonnes, based on IEA data.
Supply gaps and market imbalances
Despite increasing investments in the mining and refining aspects of lithium production, the supply chain struggles to keep pace.
The IEA reports that establishing a new mine could take upwards of 16 years, with production remaining heavily concentrated.
Currently, most lithium production is concentrated in regions like Australia, while the majority of reserves are located within the 'Lithium Triangle' of Chile, Argentina and Bolivia, areas beleaguered by water stress and environmental issues.
These regions, responsible for over half of global lithium production, already face water scarcity.
As a result, a supply-demand gap may emerge towards the end of the decade.
Reports from the IEA and other organisations suggest shortages might begin as early as 2025.
Fatih further adds: “Even in a well-supplied market, critical mineral supply chains can be highly vulnerable to supply shocks, be they from extreme weather, a technical failure, or trade disruptions. The impact of a supply shock can be far-reaching, bringing higher prices for consumers and reducing industrial competitiveness.”
Innovation and recycling
Emerging solutions, although advancing slowly, are being explored:
- Direct lithium extraction (DLE) promises increased efficiency and reduced environmental impact, yet remains largely untested at scale.
- Battery recycling could see growth after 2030 as initial EV batteries reach their end-of-life, potentially decreasing the demand for primary lithium.
- New chemistries like sodium-ion batteries avoid using lithium but currently lack sufficient energy density for widespread EV application.
A critical decade ahead
To align with global net zero ambitions, about two billion EVs are needed on the road by 2050, according to WEF.
However, global reserves, as assessed by the US Geological Survey, stand at approximately 22 million tonnes, theoretically enough for the production of two billion vehicles.
The practical challenge is formidable: overcoming economic, political and environmental barriers to access and efficiently use these reserves.
The industry faces a daunting task: tripling lithium production within the next 10 years, sidestepping unsustainable extraction practices and geopolitical tensions.
