The global lithium market is heading towards a surplus: by the end of 2024, global supply will exceed demand by more than 10%, according to the latest quarterly forecast from the Australian Department of Industry, Science, and Resources. Global lithium production in 2024 is expected to reach 1.28 million tons, while consumption will be "only" 1.16 million tons (in lithium carbonate equivalent, one of the products derived from lithium). For comparison, in 2022, global demand for lithium exceeded supply by 9% (802,000 tons vs. 737,000 tons in lithium carbonate equivalent). The price drop also indicates a surplus: in September 2024, the exchange price of lithium carbonate in China—one of the largest lithium markets—dropped to 71,500 yuan per ton, while at the end of 2022, it was near 500,000 yuan per ton.

The Market Moves into Surplus

The shift in market balance is due to a sharp increase in supply. According to the Energy Institute, global production of lithium raw materials increased by more than 80% from 2021 to 2023 (from 107.9 thousand tons to 198 thousand tons). The main increase came from three countries—Australia, Chile, and China—which together increased their production of lithium raw materials by a total of 78 thousand tons per year.

Along with the supply increase, reserves are also growing. In 2020, the U.S. Geological Survey (USGS) estimated global lithium reserves at 17 million tons, while in 2024, this figure rose to 28 million tons. Besides Australia, Chile, and China, significant increases in reserves were seen in Argentina (from 1.7 million to 3.6 million tons), the USA (from 630,000 to 1.1 million tons), and Canada (from 370,000 to 930,000 tons). These figures refer to economically extractable lithium reserves, while the geological estimate of reserves grew from 80 million to 105 million tons between 2020 and 2024, including reserves in Bolivia, which were revised upward from 21 million to 23 million tons.

The geography of extraction is also expanding. In 2023, over 40% of global lithium supply came from Australia, but by 2030, its share in the overall increase in production will drop to only 8%, according to the "Infomine" estimate. More than 90% of new lithium extraction projects are located in South (42%) and North America (24%), as well as Africa (12%) and Europe (14%).

A significant contribution to future supply growth will come from oil and gas companies, which extract lithium from brines. According to "Infomine" estimates, brines currently account for 46% of global capacity for new lithium extraction projects. The traditional method of extraction from solid rock will account for only 39% of global supply growth, with the remaining 15% coming from rare extraction methods, including lithium extraction from clay and groundwater.

The Novelty Effect is Exhausted

The diversification of extraction methods will be one of the factors contributing to further supply growth. According to the Australian Department of Industry, Science, and Resources, global lithium production will increase by 40% by 2026 (to 1.79 million tons in lithium carbonate equivalent), with supply exceeding demand by 11%. Another factor in the surplus will be the electric vehicle market reaching maturity, a stage when consumer choice is driven not by novelty but by competition in costs.

This can be compared to Everett Rogers' concept of innovation diffusion, developed in the 1960s. He divided consumers into five main groups: "innovators" (2.5% of total consumers), "early adopters" (13.5%), "early majority" (34%), "late majority" (34%), and "laggards" (16%). According to this model, the electric vehicle market is entering the "early majority" stage. In 2023, the share of electric vehicles and plug-in hybrids in global passenger car sales was 18%, and in China, the leading country in the industry, it was 38%, according to the International Energy Agency (IEA). At the same time, the abolition of subsidies for electric vehicle purchases in China and Europe is already affecting sales volumes and, consequently, lithium demand.

Support for demand may come from the energy storage segment, which has been rapidly developing due to the large-scale deployment of renewable energy and the need to balance electricity supply during cloudy and windless weather. According to the Energy Institute, the installed capacity of energy storage systems in the world’s power grids increased more than ninefold from 2020 to 2023, from 6.1 to 55.7 GW. However, over 80% of this growth was concentrated in just two countries—China and the USA. In addition, technological alternatives to lithium-ion batteries, such as vanadium and zinc-bromine batteries, are emerging, which help reduce the use of critical minerals.

Russia’s Niche

All of these factors—the diversification of extraction technologies, the maturity of the electric vehicle market, and the emergence of alternatives to lithium-ion batteries—are contributing to the slowdown of the "lithium rush," in which Russia plays a relatively minor role.

Currently, Russia does not mine lithium raw materials; the country imports raw materials for "first-stage processing," such as lithium hydroxide (by the KhMZ and Halmek Trading House) and metallic lithium (by the nuclear fuel company TVEL, a subsidiary of Rosatom).

Russia also lacks "second-stage" production—elements for batteries such as anodes, cathodes, and electrolytes. Ongoing and planned "third-stage" facilities include the mass production of battery cells, launched by the company "Renera" at the Moscow Polymetal Plant, as well as Rosatom's gigafactories in New Moscow and the Kaliningrad region.

According to VYGON Consulting, with the launch of Rosatom's gigafactories, lithium demand in Russia will increase to 20.5 thousand tons per year (in lithium carbonate equivalent) by 2030. For comparison, the projected capacity of the Kolmozerskoye deposit (Murmansk region), which is currently under development, is 45 thousand tons of lithium carbonate per year. Several other projects are also announced in Russia, including lithium extraction from the Polmostundrovskoye (Murmansk region) and Zavitinovskoye (Zabaykalsky Krai) deposits, with capacities of 20,000 and 75,000 tons of lithium carbonate per year, respectively, as well as extraction from brines at the Kovykta and Yaraktinskoye deposits in Irkutsk region.

Surplus Will Be Long-Term

As a result, the Russian market may become surplus by 2030, when the Kolmozerskoye deposit reaches its full capacity. Most Russian projects, if successfully implemented, will be focused on the export market, where the surplus will also remain due to the development of large deposits in Africa. These include the Manono (DR Congo), Bikita (Zimbabwe), Goulamina (Mali), and Ewoyaa (Ghana) projects, whose combined geological reserves total more than 10 million tons of lithium carbonate.

The development of these resources will offset the risks of rising prices. Consequently, the "lithium rush" will gradually fade, and the metal, contrary to the widespread notion of the early 2020s, will not become the "new oil."

Author: Sergey Tereshkin, founder and CEO of OPEN OIL MARKET.



Translated using ChatGPT.


Source:    https://itek.ru/analytics/litij-ne-novaya-neft/