© pixabay
Advertisment

Lithium—gold for batteries

Electric mobility is really gaining momentum. But gaps in supply for important raw materials, especially lithium, could noticeably slow down this trend.

The market for electric vehicles is booming and the demand for traction batteries too. According to a current forecast from industry agency Benchmark Mineral Intelligence – based on the plans of battery manufacturers—the global production capacity is expected to grow to more than 6 terawatt-hours (6,000 GWh) by 2030. That’s enough for around 109 million electric vehicles. However, the analysts expect that only around 70 percent of the planned gigafactories will actually be producing, with an average capacity utilization of 70 percent. In this case, that would fuel a good 50 million electric cars. McKinsey, meanwhile, expects more than 70 million electric vehicles in the EU alone by 2030. So, if the goals for electric vehicles are to be reached, the production of lithium-ion batteries has to be ramped up worldwide.

Lithium in short supply

Currently, however, battery capacity is already growing twice as fast as the supply of lithium. According to Benchmark, the 6 terawatt-hours of production capacity needed by 2030 would require around 5 million tons of lithium. Last year, lithium production reached just 480,000 tons of lithium carbonate equivalent (LCE). According to the current Allianz Trade study, there would be a shortage of over 500,000 tons of lithium carbonate by 2030. This is a gap that must be closed quickly with investments worth billions. Although lithium is found in adequate quantities, its extraction – for example from brine – is a long, energy-intensive and expensive process.

But it’s worth it right now. After all, lithium prices are going through the roof and the steady reduction in the price of electric car batteries has also been reversed significantly as a result. According to data from Benchmark Minerals, the global average price for battery-quality lithium carbonate in March was around USD 60,000 per ton – double the price compared with the end of 2021. And the war in Ukraine is also further exacerbating this trend.

High prices and limited availability won’t stop the trend toward electric mobility altogether, but they could slow it down, according to the Roland Berger analysts. In their new study, “The Lithium-Ion (EV) battery market and supply chain”, they put the annual growth of the global market for lithium-ion batteries at 30 percent by 2030.

Lithium-ion battery market Source Roland Berger

The global demand for lithium-ion batteries will reach more than 3,100 Gwh by 2030.

At the same time, however, they see a wide variety of risks along the supply chain:

  1. Geopolitical factors: The sourcing and processing of important resources such as lithium are concentrated on a small number of countries.
  2. ESG: Battery manufacture has a significant ecological and social impact. For example, the extraction of lithium uses large amounts of water and some production processes emit large volumes of CO2.
  3. Price: In addition to fluctuating prices for raw materials, the costs for additional production capacities in the “mine-to-cell” value chain must be taken into account. A capital requirement of EUR 250 to 300 billion is predicted for the next eight years, of which one third will go toward covering European demand.

Recycling, regionalization and vertical integration

In order to avoid bottlenecks and counteract cost explosions, changes are needed in the entire supply chain. For example, according to the analysts from Roland Berger, an integrated system between metallurgy and chemistry could cut costs at production level. And greater regionalization and a joint choice of location for several steps in battery manufacture could limit geopolitical as well as ESG risks. If the EU Commission has its way, 80 percent of the European demand for lithium is to be covered from European sources by 2025. There are large deposits in Spain, Portugal, Serbia and in the Rhine rift in Germany.

In addition to sourcing, the topic of recycling will play an increasingly important role as of the end of the century. Regulatory measures are compelling companies to introduce a circular economy for batteries along the entire value chain.

Advertisment
Advertisment
Advertisment
Advertisment
Advertisment