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Global lithium production is expected to catch up with demand in coming years; prices set to decline - report

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(Kitco News) - In its recent research report, the Australian Government's Department of Industry, Science, Energy and Resources (DISER) said that lithium prices are forecast to remain elevated in 2023 before falling significantly in 2024 and 2025 when lithium supply will catch up with demand.

According to the report, world lithium production is forecast to continue growing, spurred by rapidly increasing world demand induced by the global energy transition, and the high prices resulting from lithium market deficits in recent years.

In lithium carbonate equivalent (LCE) terms, world lithium production is forecast to increase from 737 kt to 1,472 kt over the 2022-25 period. This rise will result from increased investment in the extraction of brine and mining of hard rock, including spodumene and lepidolite.

DISER said that increased extraction of lithium resources reflects higher production across all major producer nations alongside the ramp up of some smaller producers.

Lithium production in Australia, the world’s largest lithium producing nation responsible for 50% of global lithium output in 2022, is forecast to increase from 382 kt to 631 kt LCE in the 2022–25 period.

Chile is also expected to see further growth in lithium production over the 2022-25 period. The country’s lithium extraction is forecast to increase from 161 kt to 236 kt LCE over the 2022–25 period.

However, DISER noted that the rate of growth in lithium extraction in China faces some uncertainty due to the prospect of further government regulation. China is currently forecast to increase lithium extraction from 157 kt LCE in 2022 to 288 kt LCE by 2025. A key uncertainty for this forecast relates to the policing of Chinese industry mining/processing standards, particularly for the extraction of lepidolite.

Elsewhere, Argentina, Canada and Zimbabwe, are expected to significantly increase lithium extraction, and account for a combined 19% share of global extraction by 2025 (from 5.1% in 2022).

On the demand side, DISER said that the global lithium consumption is forecast to continue growing at a rapid rate, driven by high growth in the use of rechargeable batteries.

In lithium carbonate equivalent (LCE) terms, global lithium consumption is forecast to increase from 814 kt to 1,350 kt over the outlook period (from 2022 to 2025).

“Lithium demand for rechargeable batteries continues to grow at a much faster pace than other sources of industrial demand for lithium. Battery demand for lithium is expected to maintain high growth, increasing by 22% per year over the 3 years to 2025,” the analysts said.

According to the report, rapidly growing battery demand is driven by the use of lithium for electric vehicle (EV) batteries. EV demand is expected to take up an increasing share of total lithium demand, due to rising EV uptake.

Looking at the global lithium supply-demand balance and lithium prices, DISER said that prices are forecast to remain elevated in 2023, then decline significantly in 2024 and 2025 (but not to the low levels observed in 2019 and 2020), as the supply of lithium catches up to demand.

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