Lithium supply chain set for rapid growth and transformation

20:56 PM | June 7, 2019

Peter Zhang (l.), Yahua Lithium Technology(Sichuan)Co. Ltd, and
IHS Markit principal research Nell Agate Tsui discuss lithium
outlook at The Battery Show in Stuttgart, Germany.
The rapidly transforming smart and digital world will provide a catalyst for lithium demand over the next two decades led primarily by battery applications such as electric vehicles (EVs), says Nell Agate Tsui, principal research analyst of the global battery materials team at IHS Markit.

Demand could triple to about 1.3 million metric tons (MMt)/year of lithium carbonate equivalent (LCE) by 2030, according to IHS Markit estimates. Despite quickly evolving battery technology and cathode chemistries, lithium faces low substitution threats over the long term, Agate Tsui told attendees at the The Battery Show, Europe held in Stuttgart, Germany earlier this month. “Lithium is a superior material that addresses a specific and niche role within cell chemistry, so we don’t see this changing for some time.”

Supply is growing quickly in response, with Australia’s advance most notable. Australia overtook Chile as the largest producer of lithium material in 2017 and makes up almost 60% of global production as of 2018, Agate Tsui says. “This is a far cry from the expectations of the market five years ago where industry convention was quick to dismiss hard-rock investment,” Agate Tsui says. “The supply landscape will likely continue shifting as upstream process innovations abound.”

There is a stark north-south divide in the global supply chain. Upstream minerals production is anchored in South America, Africa, and Australia, while midstream processing, cell production, and battery pack assembly is scattered across Northeast Asia and to a smaller extent Europe and US. “Seamless and meaningful vertical integration of processed output should be the next major milestone for lithium chemicals,” Agate Tsui says. “Upstream participants need to act now if this market is to proactively reduce the risk of man-made bottlenecks in the future.”

Outside of batteries, lithium is used across an array of diverse sectors, including ceramics, greases, and polymers. “As with most industrial metal demand, the landscape has shifted to Asia,” Agate Tsui adds “Looking forward we expect this share of industrial demand to grind lower from 60% of total demand today, to roughly 20% over the long term and we have already observed signs of this shift impact traditional industrial sectors.”

There are risks and barriers that need to be addressed if lithium demand is to reach forecast potential. Such factors include the need to incentivize the “investment required to physically make enough cells needed to match lofty demand estimates,” Agate Tsui says. “[That will require a combination of factors to succeed, such as] equitable margin generation for OEMs [original equipment manufacturers]  to fully commit to EVs, and assurances that infrastructure facilitates rather than obstructs EV adoption rates.”

While upstream raw material lithium supplies are in a technical surplus today, the risk of midstream and downstream bottlenecks increases, particularly if “outsized demand expectations are realized.” “There are obvious and ongoing upstream challenges as the lithium market matures and ensuring the seamless flow of material through the supply chain needs to be addressed,” Agate Tsui says. “In the future, it is equally possible that should policy, incentives, and public perception align to promote a substantial increase in battery demand, more in line with our bullish scenario  bottlenecks could just as easily crop up in mid and downstream sectors.”

“The lithium market will continue to undergo transformative changes in the coming years,” Agate Tsui says. “Both producers and consumers will need to position for these changes, if they wish to participate in our rapidly evolving smart and digital world.”


For more information on IHS Markit’s new Global Battery Materials (GBM) Market Advisory Service, please contact Nick Kovics (Nick.Kovics@ihsmarkit.com); +1 832 679 7299