The global market share of electric vehicles is set to rise so quickly that battery manufacturers will not be able to meet production requirements from 2027, a Rystad Energy analysis has shown.
The reason is that mining capacity of lithium, a key ingredient in Electric Vehicles -purposed batteries will fall short of demand, unless investments in new mines accelerate.
According to Rystad Energy, today’s lithium mining capacity can comfortably satisfy current EV market demand, but as demand increases Rystad predicts a “serious lithium supply deficit” starting from 2027. Tesla’s Elon Musk has already flagged a delay in the Tesla truck because of the potential shortage of battery cells.
“Under the current pipeline, capacity deficits could triple lithium prices towards the end of this decade,” Norwegian independent energy research group Rystad Energy said.
The report said that today’s lithium mining capacity can comfortably satisfy demand from the electric vehicle market, however, the fast rise of electric vehicles is set to create a serious lithium supply deficit already from 2027.
Rystad Energy estimates that the supply deficit is poised to delay the production of the equivalent of around 3.3 million electric vehicles with a battery of 75 kilowatt-hours (kWh) already in 2027. “The impact will grow quickly, to around 9 million EVs in 2028 and some 20 million electric cars in 2030.”
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The research firm explained that the imbalance will grow larger as the years pass and “is set to cause delays for the production of millions of electric passenger cars, even when planned new mining projects add their capacity in coming years.
More investment decisions to build new lithium mining projects need to be added to the pipeline, and fast, as Rystad Energy estimates it can take between five and seven years to develop, finance and build an average new project.
“A major disruption is brewing for electric vehicle manufacturers. Although there is plenty of lithium to mine in the ground, the existing and planned projects will not be enough to meet demand for the metal. If more mining projects are not added to the pipeline quickly, the energy transition of road transport may need to slow down,” says James Ley, Senior Vice President at Rystad Energy’s Energy Metals team.
In addition to electric passenger vehicles, the expected lithium mining capacity deficits will also disrupt the production lines of other vehicles that will be fully or partly electrified and need batteries, such as buses, trucks and hybrid cars.
Demand from the shipping and aviation industries, as well as grid storage, will also feel the scarcity of lithium.
Rystad Energy measures the remaining lithium production capability that can be used for manufacturing batteries of all applications in 2021 stands at nearly 520,000 tonnes of lithium carbonate equivalent (LCE) per year.
“We anticipate that lithium prices could replicate their past turbulence if supplies cannot catch up with booming EV demand later this decade,” added Ley.
LCE prices averaged around $8,200 per tonne in 2020, but in the previous five years the price fluctuated wildly, from $6,500 per tonne in 2015 to a record high of $17,000 per tonne in 2018.
This 160percent surge in pricing between 2015 and 2018 was due mainly to a rise in EV demand from China and a temporary shortage of lithium supply, which could naturally be replicated as the decade proceeds.
Rystad Energy concluded that there will not only need to be significant investment made in mining capacity, but structural changes will be necessary to make the lithium industry more sustainable, including the possibility of recycling lithium.
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