The spot price of lithium carbonate rose from CNY 33,000 to a high of CNY 597,500 between November 2020 and November 2022. The price has fallen back to its current level of CNY 72,500, an 88 per cent decline from the November 2022 peak. Here is an overview of lithium’s supply and demand dynamics, key producers and consumers, developments in Canada, and price outlook.
Supply:
The top 5 lithium producing countries (2023 data) in metric tons and global per cent are Australia (86,000/48), Chile (44,000/24), China (33,000/18) Argentina (9,600/5) and Brazil (4,900/3). In 2024, production levels are estimated to be 3,400 metric tons in Canada or just under 2 per cent of global supply. Current Canadian projects include the North American Lithium (NAL) Restart Project in Quebec, the Snow Lake Lithium Mine in Manitoba and the James Bay Lithium Mine Project.
Looking out to 2030, estimates for global annual production are very wide ranging from lows of 350,000 metrics tons (2x current production) to more than two million metric tons (10x current production) each year.
Lithium in Chile and Argentina is extracted from brine whereas in Australia (and Canada) it is mined from the mineral spodumene which contains up to 8 per cent Li2O (Lithium oxide). Natural Resources Canada tells us Canada currently has an estimated 3.2 million metric tons of lithium oxides resources (measured and indicated) at hard rock deposits and lithium brines in Alberta and Saskatchewan could increase these resources as technology and processing are advanced.
Demand:
The dominant use of lithium is in batteries, accounting for 87 per cent of global consumption in 2023. Battery use includes Electric Vehicle (EV) Batteries, Consumer Electronics and Energy Storage Systems. Lithium is also use in ceramics and glass, lubricating greases and in the manufacturing of polymers and synthetic rubbers as well as in air purification systems.
Global sales of Battery and Hybrid Electric Vehicles have been increasing, from 10 million units in 2022 to a projected 17 million units this year. The International Energy Agency sees sales of 30 million units in 2025 and 70 million units in 2030. Gartner and Statista show a more modest 18 million to 20 million units for 2025 and Statista sees a compound annual growth rate of 6.6 per cent out to 2029.
Interesting research from Goldman Sachs tells us average battery prices could fall toward $80/kWh by 2026, a drop of almost 50 per cent from 2023, a level at which battery electric vehicles would achieve ownership cost parity with gasoline-fuelled cars in the U.S. on an unsubsidized basis.
Research also continues into alternative battery technologies, which if successful would reduce lithium demand. The current suite includes sodium-ion batteries which utilize more abundant sodium but offer lower energy density, solid-state batteries that promise higher energy density and safety but are still in development and magnesium-ion batteries that have the potential for higher energy density.
Pricing outlook:
We are seeing a range of pricing for 2025 and 2026 based on supply/demand expectations. A number of firms show US$11,000 (about CNY 78,000) for 2025 and the range for 2026 is from US$15,000 to US$20,000. Looking out to 2030, leading analysts are showing a concentrated price range between US$10,000 and US$15,000, in line with current levels and implying a drop from 2026 expectations.
Recent lower prices are causing issue as well. In August of this year, Arcadium Lithium said it intends to pause current investment in two of its four expansion projects amid low lithium prices and as additional supply has come into the market at a faster rate than expected. Much of the supply growth has come in the form of spodumene out of Africa and lepidolite in China, and much of the investment in these resources is coming from supply chains directly connected to converters or end consumers in China as they seek to become more integrated into upstream resources.
Stock Prices and activity:
Since late summer a number of lithium stock prices have risen off their lows but are still down 70 per cent or more since all-time highs. Firms such as Albemarle Corporation ALB-N and Lithium Americas Corp LAC-T have seen increases recently with investment or take-over talk. Lithium Americas saw its share price jump after General Motors GM-N announced plans to invest US$625-million in cash and credit for a JV stake in Thacker Pass in Nevada. (Ford F-N also signed an 11-year deal for Nemaska Lithium to supply up to 13,000 tonnes of lithium hydroxide annually.) Rio Tinto RIO-N had reportedly considered a bid for Albermarle before placing a $6.7 billion all cash bid for Arcadium Lithium (ALTM-N).
Summary:
Demand for EVs is expected to pull the price of lithium up into 2026 but longer term prices look to fall off again as supply continues to outpace demand.
Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.
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