McKinsey forecasts continued growth of Li-ion batteries over the next decade at an annual compound rate of approximately 30%.
By 2030, EVs, along with energy-storage systems, e-bikes, electrification of tools, and other battery-intensive applications, could account for 4,000 to 4,500GWh of Li-ion demand.
Despite COVID-19’s impact on the automotive sector, electric vehicle (EV) sales grew by around 50% in 2020 and doubled to approximately 7mn units in 2021.
At the same time, surging EV demand has seen lithium prices skyrocket by around 550%in a year: by the beginning of March, the lithium carbonate price had passed $75,000 per metric ton and lithium hydroxide prices had exceeded $65,000 per metric ton (compared with a five-year average of around $14,500 per metric ton).
In 2015, less than 30% of lithium demand was for batteries with the bulk of demand split between ceramics and glasses (35%) and greases, metallurgical powders, polymers, and other industrial uses (over 35%). By 2030, batteries are expected to account for 95% of lithium demand.
Direct lithium extraction and direct lithium to product potential
Alongside increasing the conventional lithium supply, which is expected to expand by over 300% between 2021 and 2030, direct lithium extraction (DLE) and direct lithium to product (DLP) can be the driving forces behind the industry’s ability to respond more swiftly to soaring demand.
Although DLE and DLP technologies are still in their infancy and subject to volatility given the industry’s “hockey stick” demand growth and lead times, they offer significant promise of increasing supply, reducing the industry’s environmental, social, and governance (ESG) footprint, and lowering costs, with already announced capacity contributing to around 10 percent of the 2030 lithium supply, as well as to other less advanced projects in the pipeline.
Additional lithium sources required to bridge the supply gap are predicted to come from early-stage conventional mineral and brines projects, as yet unknown resources, and unconventional brines such as geothermal or oilfield brines. Meanwhile, new technologies such as DLE and DLP are expected to boost recovery and capacity. In addition, the use of direct shipping ore (DSO) could help mitigate short-term undersupply risk, as it did in 2018.
McKinsey anticipates that, with technology development and proof of concepts, more geothermal lithium-brine operations will appear on the global map, with some OEM and automotive companies already supporting even less advanced assets. Examples include Renault Group, Stellantis, and General Motors signing strategic partnerships and off-take agreements with geothermal lithium projects in Europe and North America.
Additionally, projects in North America are focused on extracting lithium from oil-field wastewaters. Although usually low-grade, this can be an additional resource base if the right technology is forthcoming.
So will the world secure enough lithium for the upcoming EV revolution? McKinsey believes it will, but specific actions need to be taken at each level of the lithium value chain:
- Funding new technologies DLE can boost lithium production from conventional brines by increasing levels of recovery. It can also enable lithium production from assets where lithium is currently “locked,” such as geothermal or oilfield brines.
- Exploration for new projects In 2021, almost 90% of lithium mining took place in just three countries (Australia, Chile, China). Expanding into other regions for new sources of lithium can contribute to developing a new resource base for mining.
- Early warning of manufacturers’ requirements Depending on how battery technologies develop, the industry will need more lithium carbonate or lithium hydroxide. Accordingly, end users such as OEMs and those involved in computer-aided manufacturing can help by signaling product specifications and required volumes of lithium early on. Announcing such needs well in advance will give lithium miners enough time to adapt.