In an interview with Fastmarkets on Monday, June 5, Sarah Maryssael said that notwithstanding the possibility of more competition over chemistries in the future, the fact that commercial-scale battery technologies currently rely on lithium is driving the potential shortfall.
“I do believe we’re going to be in a structural deficit that is here to stay,” she added.
Fastmarkets analyst Phoebe O’Hara said she expects the lithium market to be in deficit until 2025, due to strong demand for lithium-ion batteries for electric vehicles (EVs) and, increasingly, energy storage systems (ESS).
Maryssael noted that it is important to distinguish between lithium raw material units and battery-grade lithium. The specifications for lithium are dictated by battery producers, she said, and are getting tighter, not more relaxed.
“There is no consensus across the industry as to what makes a lithium spec. Those specs are getting tighter, those requirements are getting tighter, so as long as we keep moving in that direction, it’s very hard to envision a world in which lithium becomes commoditized and we enter into a potential oversupply,” she told Fastmarkets.
“There could be a potential oversupply with lithium raw material units, but when we’re talking about battery-grade lithium units that go into a cell, we still think that’s going to be a constraint long-term,” she added.
It’s therefore absolutely possible that battery gigafactories will lack the batteries they need as a result of a lithium supply shortfall, Maryssael said.
“I think it’s part of the messaging that you see many influential figures in the industry have been screaming from the rooftops for quite some time,” she added.
According to Fastmarkets’ O’Hara, North America is expected to be home to 19% of the world’s gigafactories by 2030, after Europe with 25% and Asia with 56%. China will hold the lion’s share with 233 plants compared with 40 gigafactories in the United States, O’Hara said.
At the same time, Maryssael acknowledged that lithium is available if a company is willing to pay the price for it, with the result that automakers with deeper pockets and those willing to overlook environmental, social and governance (ESG) standards will always be able to source the raw material.
“But is [that lithium] going to satisfy all the non-financial requirements an automaker is going to expect, including being the right quality, the right environmental, social and governance standard and the right price that you’re looking for?” she said.
How important are ESG standards to automakers?
ESG standards are of growing importance to automakers. According to Maryssael, Livent’s level of engagement with car companies on sustainability and responsible sourcing has only increased, with discussions not just “nice to have” but factors that are increasingly being built into long-term agreements.
“No commercial conversation today starts without some mention of ESG. Those two go hand in hand today, without a doubt,” she said.
“It’s not just about volume, price and length; it’s much more than that. Because they are partnerships, a lot of agreements are structured to recognize that ESG and responsible sourcing needs to be done together,” she said.
This means that automakers are actively requiring raw materials producers to abide to certain standards, including on the environment, community relations, carbon emissions, and water consumption, she added.
At the same time, investors and consumers are also putting pressure on original equipment manufacturers to operate according to specific ESG standards, she noted.
Regulation impacts battery supply chain
Regulation like the Inflation Reduction Act is already working to turbo-charge investments in battery supply chains in the United States. This is resulting in plans for a number of gigafactories as well as projects further upstream and the creation of new supply chains, Maryssael said.
According to Maryssael, much of this regulation is still very much in its early stages, with guidance to follow, and has an overwhelming theme of protectionism and nationalism.
“If the US and Europe are to develop a supply chain outside of China, you’re not going to just rely on those regions to do that – you’re going to actually rely on multiple partners, both in the private sector and the public sector,” she told Fastmarkets.
This means working with existing free trade agreement (FTA) countries as well as creating new FTA partners in the future, she said, and sharing the benefits across the different parts of the supply chain, countries and companies involved.
“Today there are a lot of critical minerals that come from Africa and South America, and the policies that are designed by the West need to be inclusive and also allow some of these countries to develop the mining standards that have come to be expected,” she added.
The US has a role to play in helping to improve standards and enabling non-western countries to be part of the energy transition, she noted.
Reliance on China
Regulations are also focused on diversifying supply chains away from a reliance on China, which currently controls a significant portion of global lithium chemical production, and the majority of the world’s cathode production and cell manufacturing.
Nonetheless, the reversal of decades of globalization is unlikely to be achieved any time soon, with China remaining central to the lithium market going forward, industry analysts say.
Livent itself has manufacturing facilities in both Rugao and Zhangjiagang, China.
“Any Western company with a footprint in China, Livent included, will never completely remove itself from China. It is still a very key market for lithium, for lithium chemicals; it’s a geography we’ll continue to have an important presence in,” Maryssael said. “The question is more, where do you grow relative to China, do you focus the growth elsewhere?”
For its part, Livent plans to help develop the supply chain for the Americas while growing its global footprint, but customers will also play a key role in determining growth, she noted.
“If customers tell us ‘We want you to grow more supply in China,’ we will go where that leads. A lot of what we’re hearing from customers today, as you’d expect, is ‘how do we grow in North America, how do we grow outside of China’,” she said.
“It’s a question of, how do you prioritize your growth, and I think it’s going to be led by customers telling us, and certainly what some customers are telling us today is they want to try to look for more opportunities outside of China,” she added.
Energy storage overlooked despite lithium demand growth
While electric vehicles have garnered the attention of the lithium-ion battery market, Maryssael noted that stationary energy storage has been somewhat overlooked, despite being a key driver of lithium demand growth.
“It’s very conceivable that stationary energy storage could be as big, if not potentially bigger, than EVs. Energy storage really has the opportunity to benefit populations around the world in transitioning grids away from fossil fuels to renewable energies,” Maryssael said.
She noted that many of the chemistries that have been contemplated for energy storage are lithium-based, particularly lithium iron phosphate, which makes the lithium growth story even more compelling.
“Whatever short- or near-term trends you might see in the market, and even if you don’t believe the EV story or find ways to poke holes into it, you’d find it much harder to poke holes into the energy storage story. It’s often the neglected part of the story but [Livent] see ourselves as eager to supply the entire industry,” she added.
In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Sign up today to receive Andrea’s content as it is published. And for more information on the current lithium market, take a look at our dedicated page for lithium price insights.
