Global Lithium Market Industry Demand, Price Forecast And Risks Analysis

global lithium market industry demand analysis pricing forecast

Majorly used in pharmaceutical drugs to treat bipolar disorder, in lubricants, in the glass industry, and in rechargeable batteries, the lithium market forecast indicates a market growth of 8% CAGR till 2020. 

Further, considering the significant negative impact fossil fuel vehicles have on our environment, the shift toward Electric Vehicles (EV) is growing stronger across the world, marking the rise of many potential industries in South-East Asia, USA, UK, etc. 

Market Industry Demand And Price Forecast 

● According to the US Geological Survey, the global Lithium supply has gone up by 23% in 2019 and is expected to rise continuously until 2025. Amidst the bright promise of tomorrow, the global Lithium production industry welcomed five new players in 2018 (North American Lithium, Tawana Resources, Altura Mining, AMG Advanced Metallurgical Groups, and Pilbara Minerals) in 2018 and outlived the fears of oversupply projected at the beginning of 2018. 

● However, 2019 began on a slightly somber note. The EV vehicle sales have increased by 90% in 2019, but this growth rate is half of the EV vehicle sales growth rate in 2018. This affects the Lithium industry significantly because the EV vehicles industry uses almost half of all the Lithium produced today. 

● During Q2 of 2019, all primary producers and suppliers of Lithium reported a fall in profits and a weaker demand. Nevertheless, all significant producers agree on the market forecast for Lithium, which states that its demand will grow in double digits in the coming quarters. 

● The latest estimates from McKinsey’s Future Mobility Initiative indicate that EV vehicle production will touch the 13 million to 18 million units mark, reaching approximately 26 to 36 million units in 2030. This is a substantial increase compared to the current production capacity of 3.2 million units. This projects an average rise of over five times of today’s demand for Lithium. 

● With Tesla’s Hornsdale Wind Farm Lithium battery for renewable energy solution clearing all suspicions of operational efficiency (with approximately two years of a successful run), more governments are chalking out plans to customize the solution for their requirements. This will also prove a major boost to Lithium demand further in 2019 and the future ahead. 

The major players in the Lithium supply industry are Albemarle, FMC, SQM, Genfeng Lithium Wesfarmers’, Tianqui Lithium, and Global Lithium. 

Risk Analysis 

● Communication and Mobility 

Electronic devices are smaller and stronger than ever: smaller size and extended range of such devices demand a stronger power source such as batteries. To make stronger batteries, industries will need to amp up the technology and amount of raw materials used in the batteries. Lithium is an essential component of such batteries, more so for the rechargeable variants. Hence, the increase in demand for these devices will significantly boost Lithium sales. 

● Energy and Natural Resources 

The rising awareness for Renewable Energy has led to governments placing strict restrictions on fossil fuel-run vehicles, affecting the transportation industry significantly. This is an opening for EV suppliers to fill the demand-supply gap for vehicles. A boost in sales of electric vehicles is a direct push for Lithium demand. 

○ Smart Grid and Energy Storage Solutions: Considering the unsustainability of current solutions for power supply, governments are exploring other options like the Hornsdale Farm Battery. These eco-friendly and economical solutions will see a hike in demand and hence augment Lithium demand. 

○ Inclinations Towards Fewer Chemicals and Simpler Processes: EV industry is consistently looking at solutions to make their car batteries more efficient and economical, to bring down the cost of production of EV products. Technologies like solid-state batteries, Li-S batteries, AL-ion batteries, are some examples of these innovations. This will augment sales for EV vehicles which in turn will raise the Lithium demand. 

● Safety and Health: With research unraveling the secret behind how Lithium aids treatment of bipolar disorder, the acceptance of Lithium in the medical field is bound to increase. This will open another avenue of expansion for Lithium suppliers. 

The Constraints 

● According to a report by KPMG, most of the rechargeable battery based vehicles will be launched in and after 2020. This will put an unavoidable pressure on the Lithium supply market, which may result in a steep rise in Lithium prices as the supply falls short. 

The EV sales growth in China (the biggest EV consumer) is slowing down, and the fabled EV revolution is not here yet. This is the primary reason why the Lithium industry is facing a slump currently. Considering other factors like government regulation, infrastructure support requirements for electric vehicles, and consumer inertia hampering the rate of sales growth, it is quite possible that the EV revolution gets delayed. The Lithium industry will need to survive this period of a slump. It will be particularly tough for smaller players. 

● While there are unexploited Lithium reserves, for example, the Lithium reserve under Salar de Uyuni salt plains in Bolivia; it might not be possible to sustain the high demand for Lithium as it is already a rare material. 

● Only certain forms of Lithium are suitable for high-performance rechargeable batteries, and the process to obtain, refine, and enrich these forms of Lithium is complex and expensive. Scaling up the current production capabilities to match the high market demand will essentially decide which supplier will stay in the industry. 

Conclusion 

Just like EV vehicles are the new diesel engine, Lithium is the new petroleum. The Lithium industry might suffer a period of the slump for the current year; however, by 2050, the Lithium industry is set to soar and be among one of the most competitive markets. Competitors who can scale up in time and can manage to provide a steady supply of Lithium will be the only ones who survive in the Lithium market of tomorrow. 

Consequently, the rise of the Lithium industry is inevitable. Keep yourself updated on the growing and fluctuating lithium market to insure that your investment is optimized and educated. You can even make a living day trading lithium!

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