More than Hype: Tesla’s Impact on the Lithium Market

Electric vehicles are driving increased demand for battery-grade lithium hydroxide.

Enthusiasm for the Tesla Model 3 will likely increase demand for lithium.

Enthusiasm for the Tesla Model 3 will likely increase demand for lithium. (Image courtesy of Tesla Motors.)

Forget gold; now could be the perfect time to invest in lithium.

Roskill Information Services recently published a report on the lithium market with forecasts to 2025 citing Tesla and other manufacturers of electric vehicles (EVs) as the major factor in the growing demand for lithium.

Electric Vehicles Driving Lithium Demand

According to the report, rechargeable batteries were the leading use for lithium in 2015, accounting for 37 percent of total global consumption at approximately 66,000 tons of lithium carbonate, the first chemical in the lithium production chain.

Growth in lithium-ion batteries in the early 2010s was dominated by smartphones and tablets, but since 2013 the automotive market has begun to have a much more significant impact. Electric vehicles (EVs) accounted for 30 percent of the lithium-ion battery market in 2015.

The growth of the Chinese EV and electric bus market has been particularly influential.

Despite the hype surrounding Tesla’s Gigafactory, Roskill expects Asia to remain the primary growth engine for lithium demand going forward. According to the report, China, Japan and Korea could account for 70 percent of consumption by 2025.

Battery-grade lithium hydroxide is now the fastest-growing lithium product, with contract prices jumping nearly 20 percent in 2015.

Keeping Up with Lithium Demand

An oversupply of lithium carbonate equivalent in the early 2010s negatively impacted pricing which, along with the overall consumption downturn in 2009, led to a deficit. This lithium deficit is expected to deepen through 2016 as supply growth fails to keep up with demand, which the report projects will nearly triple by 2025.

Roskill’s overall base-case growth forecast is for 6.4 percent per year through 2025, but the report also states that this could rise to 9.3 percent per year if lithium requirements for EV and energy storage systems increase.

Based on the current enthusiasm for EVs (no pun intended), that does seem likely.

The full Roskill report, “Lithium: Global Industry, Markets & Outlook” is available here.