2017 REVIEW: Lithium moves to mainstream in electric vehicle revolution

It took Elon Musk’s Tesla to rev up interest in lithium but the buzz surrounding the metal really stepped up in 2017 when several other automotive manufacturers joined the race.

It is the use of lithium-ion batteries in electric vehicles (EVs) that has driven expectations for increased demand and has started to put pressure on the supply chain.

Mining companies have stepped up production ever since Tesla unveiled plans to use cutting-edge battery technology to produce EVs. Still, current production is likely to fall short of demand requirements, particularly now the drive towards more energy-efficient vehicles has spread worldwide.

According to Industrial Minerals Research, lithium demand was 201,000 tonnes on a lithium carbonate equivalent basis in 2016, with EV battery applications accounting for just 24,000 tonnes. Demand outstripped supply by 11,100 tonnes last year, with a deficit of 3,300 tonnes forecast for 2017.

All of this has added upwards impetus to prices over the past couple of years.

By June 2016, the lithium carbonate spot price, ex-works domestic China, had more than tripled from $7.70 per kg in October 2015 to an average of $27 per kg. It has since eased, with Industrial Minerals assessing the price on November 16 at $24.30 per kg.

Automakers

The demand side of the lithium equation has not been in question.

Tesla has been throwing everything it has into meeting its ambitious annual production targets of 500,000 vehicles by 2018 and double this by 2020.

Other manufacturers have been rapidly entering the EV game, spurred by the move of governments globally to cut emissions and phase out fossil fuel cars. This is particularly the case in China, where the drive to cut air pollution has led to heavy subsidies and soaring EV demand.

Currently the world’s largest EV market, China accounted for roughly half the 753,000 plug-in EVs sold in 2016, International Energy Agency data shows. There are already successful domestic firms such as Beijing-based BAIC Motors as well BYD, the country’s largest EV seller.

The Chinese government said in September it is working to eventually eliminate fossil fuel vehicles, spurring automakers to accelerate their own EV plans.

German’s Volkswagen will see its first EV hit the Chinese market next year, with the goal of a cumulative production of 1 million EVs by 2025.

US automaker Ford meanwhile has said 70% of sales in China will be electrified by 2025, while Chinese-owned Volvo said every car it produces from 2019 will have an electric motor.

General Motors already sells the two-seater Baojun E100 in China and is planning two new EV models next year.

Similarly, governments in the UK, France and India have laid out plans to get rid of fossil-fueled vehicles, adding to the impetus towards EV development.

Daimler’s Mercedes plans to offer an electric version of every model it sells by 2022 while BMW, already a pioneer in EV with its i3 model, is aiming for 12 fully electric models by 2025. Nissan, meanwhile, has said EV will account for 20% of its European sales by 2020.

Supply

The biggest question in 2017 became not whether there are enough companies willing to move into EV production but whether the market could meet the surging supply for battery materials like lithium that arose.

According to Industrial Minerals, an additional 92,000 tonnes per year of lithium production will be needed by 2020 to meet demand projections; 195,000 tonnes more, relative to 2016 levels, will be required by 2026.

Opinions are mixed over whether the current lithium deficit will turn into a supply shortfall.

Several new projects are scheduled, including Galaxy Resources’ Mt Cattlin and the Mt Marion project, which is owned by a consortium including Neometals Ltd and Jiangxi Ganfeng Lithium Co. Expansions have also been announced and other projects will start to come to the market towards the end of the decade.

Yet China has not set a timetable to eliminate fossil fuel cars and may not follow through on its plans; as well, there could be some slippage to other government and project targets. Lithium also faces competition from other battery materials such as cobalt, nickel and copper.

Similarly, not all lithium supply is suitable for battery conversion; technologies are still being tested. There are also other traditional uses for lithium that will compete with supply, while energy storage has the potential to become a major new lithium demand area.

The move of lithium into position as a key energy metal of the future has only just begun.

Martim Facada in London contributed to this report.

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