How is lithium demand and supply looking in 2022 and beyond?

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How is lithium demand and supply looking in 2022 and beyond?

3D Lithium Element
Image source: © 3dalia | Megapixl.com

Highlights

  • Lithium is used in the manufacturing of electric vehicle (EV) batteries, drugs, ceramics and glassware.
  • The wide gap between demand and supply could help the prices of lithium to be firm in the coming years.
  • Governments around the world are trying their best to strengthen their position as far as access to lithium is concerned.

Lithium players saw the prices of the metal jump multifold in 2021. It is mainly used in the manufacturing of electric vehicle (EV) batteries, drugs, ceramics and glassware.

The stunning surge in the demand for the light metal was underpinned by a robust increase in the demand for EVs as various countries incentivised the sale of EVs. 

The demand for lithium is further expected to remain firm in 2022 due to limited supply. As per the Resources and Energy Quarterly report estimates, spot spodumene prices are expected to reach US$1,185 per tonne in the next year on back of strong demand from the EV manufacturers.

Good Read: How prepared is Australia to cash in on the upcoming lithium boom?

The prices of lithium could be determined by various factors.  Let's have a look at them briefly.

Demand and supply gap

Demand & Supply gap

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The lithium market is expected to remain tight in the next year too. As per the estimates made by S&P Global Market Intelligence, the demand for lithium is expected to be around at 641,000mt lithium carbonate equivalent (LCE) in 2022, while the supply is expected to be 636,000mt LCE, creating a market deficit of 5,000mt LCE, significantly lower than the 2021 deficit of 8,000mt LCE.

The wide gap between demand and supply could keep the prices of lithium firm in the coming years.

Raise of the EVs

A rapid surge in the demand for EVs, supported by a wide range of models, cheap operating costs, and government subsidy has helped to keep the demand for lithium strong. Furthermore, the demand for EVs is expected to only grow in the coming years.

Related Article: 10 exciting ASX-listed battery metal stocks under $1

The skyrocketing demand for EVs is forcing the battery and EV manufacturers to ensure that the long-term supply of lithium is secured.

Race to zero-carbon emission

As the world is aggressively progressing to achieve the 2050 carbon-neutrality goals, as a part of commitments made in the Paris Agreement, the demand for the battery metals is expected to rise.

Net-zero emission

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Governments around the world are trying their best to strengthen their position in the lithium market. The European Commission added lithium to the list of critical raw materials for the first time in 2020. In addition to this, a report published by the International Energy Agency (IEA) in May also recommended governments to start stockpiling battery metals, considering that the demand could zoom up in the coming years. 

Chile’s comeback

The role of Chile to produce lithium will be a significant factor to watch in 2022. The country lost the crown of the world's largest lithium producer in 2018. Chile opened a tender in October 2021, inviting 57 companies to explore and produce 400,000 tonnes of lithium. Chile’s current move could bring the country back into the race and help ease supply.

China’s role

Despite having the world's fourth-largest lithium reserve size, the country is not able to produce a substantial amount of lithium as most of the battery metals are found in the salt lakes around Tibet and Qinghai which are located at high altitude Tibetan plateau, making it difficult to refine and transport lithium.

Also read: Three ASX stocks to watch in the wake of Biden’s Green Energy push

The adoption of new technology to extract more resources could help the country to boost its production and in turn help the lithium supply to improve in 2022.

How is lithium demand and supply looking in 2022 and beyond?

 

Bottom Line

The demand for lithium is anticipated to rise in 2022 with EVs gaining market share amid the green push. However, various factors including Chile and China’s supply will play a key role in deciding the fate of lithium prices in the coming years.

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