The market opportunity: lithium demand will increase by over 40x by 2040 due to EV adoption and energy storage needs
This article is part of our lithium series. Read the main article here. Keen to know more about technologies such as direct lithium extraction and battery recycling? See this article.
By Max Werny, Yair Reem, Iris ten Have, and Fernanda Bartels
Due to the increasing use of electric vehicles (EVs) in China, Europe, and the United States (with a projected 40% electrification of light vehicles by 2030) and a growing demand for grid storage applications, the global need for lithium is set to surge. From 0.72 million tonnes of lithium carbonate equivalent (Mt LCE, denotes all forms of lithium) in 2022, it is estimated to reach 3.06 Mt LCE in 2030, indicating a substantial 20% annual growth rate.
That being said, not all forms of lithium (i.e. lithium carbonate, Li2CO3; lithium hydroxide, LiOH; and lithium metal, Li) will follow the same growth trajectories. While the most common precursor for battery production, lithium carbonate, is expected to grow by 13% per year until 2030, lithium hydroxide, which is preferred for high-nickel lithium nickel manganese cobalt oxide (NMC) batteries, will see an even higher growth in demand, increasing annually by 31% until 2030.
To meet the anticipated demand in 2030, 1.42 Mt LCE will be required on top of the 0.75 Mt LCE of existing annual supply and 0.89 Mt LCE from planned and probable projects. Considering this substantial growth in lithium demand — more than 3x by 2030 and more than 40x by 2040 — concerted efforts are required from governments and industry to ramp up global lithium production with immediate effect.
Where can lithium be found and where do we get it from?
Lithium can be found in the form of brines (highly concentrated salt solutions containing dissolved metal ions), hard rock (e.g. spodumene) and clays. Brines make up approximately 66% of the world’s lithium resources but only account for around 39% of production. Ores, on the other hand, represent around 25% of global resources and close to 60% of production.
Brine production is concentrated in the so-called ‘lithium triangle’, which includes Bolivia, Argentina and Chile, while Australia is home to the majority of hard rock (spodumene) mines. Australia (44%) and Chile (28%) are currently the largest producers of lithium in the world, while 60% of lithium refining takes place in China.
In general, there is significant untapped potential and room for exploration in the area of brine-based lithium extraction. Despite their abundant presence, brines are underutilised in current production practices. Extensive investments in this area will unlock their full potential and help us meet the growing demand for lithium.
How is lithium currently won?
Hard rock
Each type of lithium source comes with its own challenges and requires different mining or extraction processes. Let’s first look at ore or hard rock mining. Lithium-rich ores are processed via acid roasting, an energy-intensive process that involves subjecting the ore to high temperatures (1100 °C) and concentrated acids.
Hard rock mining and refining projects possess several advantages in comparison to traditional brine operations. Most notably, they boast shorter project development and processing times. These attributes make hard rock mining an efficient and scalable option. However, these benefits also come with major drawbacks. One significant concern is the high emissions associated with hard rock mining, as is particularly evident for spodumene extraction, with emissions reaching 15 tonnes (t) of CO2 per tonne of lithium carbonate equivalent (LCE). Additionally, despite the efficiency gains, hard rock mining tends to yield lower profit margins.
Several companies are trying to address these concerns by redefining how lithium is extracted from lithium-bearing ores. From using carbon dioxide to extract lithium from hard rock deposits to employing biotechnology to break down minerals, emerging technologies could revolutionise the way we go about lithium extraction and processing.
Brines
Now onto brines. While a large share of the world’s lithium sits in brines, their utilisation is only starting to gather pace due to the significant surge in lithium demand and increasing costs associated with hard rock mining projects.
While extracting lithium through solar evaporation and chemical precipitation offers certain advantages, such as lower emissions (5 t CO2/t LCE), competitive production costs, and higher profit margins, it is also not without significant drawbacks. It is based on slow and uneconomical evaporation and precipitation processes, resulting in long processing times ranging from 12 to 18 months. More than 40% of the lithium is lost during these procedures, significantly impacting the overall yield. The substantial land area required due to evaporation costs poses a further challenge, and the method’s high water usage contributes to environmental concerns. All in all, the extended processing times, land and water requirements, as well as lithium losses underline the need for careful consideration of the overall sustainability and efficiency of traditional brine projects.
How can lithium be sourced more sustainably?
Direct lithium extraction
Direct lithium extraction (DLE), on the other hand, has the potential to become a game changer for the industry as it avoids several of the above mentioned limitations. With the help of chemical process technologies, brines can be processed within days at competitive costs and a lower environmental footprint than traditional brine operations. From a CAPEX perspective, DLE projects are expected to be in a similar range as traditional pond projects. Any higher upfront capital intensity of a DLE plant can be offset by its improved unit economics. These are associated with the high lithium recovery rates that are expected for DLE.
Battery recycling
Apart from extracting more lithium through optimised mining and refining processes, we also need to utilise the resources that we already have. Recycling represents an alternative pathway to extract lithium and other valuable materials from end-of-life lithium-ion batteries and manufacturing scrap, especially for countries and geographies with a lack of resources or established extraction projects (e.g. Europe). From an environmental point of view, battery recycling saves huge amounts of CO2. Recycled raw materials have a CO2 footprint of 8 kg CO2e/kWh relative to 29 kg CO2e/kWh for virgin raw materials, which represents a 72% reduction. Recycling is expected to be profitable, too. By 2025, recycling could yield approximately €550 per tonne of battery material.
Despite current battery recycling rates only amounting to around 5%, end-of-life lithium-ion batteries are expected to feature more prominently as a secondary source of lithium soon, potentially contributing around 6% of total lithium production by 2030. According to a recent study by McKinsey, the global supply of recyclable battery material will increase significantly over the next two decades at a rate of 25% per annum. Until 2030, manufacturing scrap from battery gigafactories will form a large share of the available material. From there onwards, the first wave of end-of-life batteries will take over, pushing the global supply of recyclable materials to unprecedented levels. In Europe alone, 5950 kt of recyclable battery material (1 TWh) will become available by 2040 — a 10-fold increase compared to 2030. At a global level, recycled materials could contribute between 30% and 60% to battery cell production by 2040.
To accommodate the large volumes of recyclable material in the future, significant investments, in the range of several billion euros, will be required to expand recycling capacities. In fact, several electric vehicle (EV) OEMs, such as Toyota, Ford, Volvo, Volkswagen and GM have already established strategic partnerships with leading battery recyclers, such as Redwood Materials, Cirba Solutions, and Li-Cycle, to ensure a long-term supply of raw materials that are critical for battery production.
Governments all over the world are starting to recognise the importance of recycling and are taking steps to accelerate its wide-scale adoption. While South Korea and China have been leading the way with recycling rates of 90%, the USA is incentivising EV battery manufacturers to use recycled materials via the Inflation Reduction Act (IRA, 2022). In Europe, the EU recently defined collection and recycling quotas through its Battery Regulation. The regulation sets a target of 80% for the recovery of lithium from waste batteries by the end of 2031, while also stipulating a minimum level of recycled lithium that has to be integrated into various battery types (6% by 2031).
With promising regulatory momentum, recycling is emerging as a profitable and environmentally friendly solution to recover high value battery metals and graphite.
Are you an entrepreneur pushing the frontiers of DLE and/or battery recycling technologies? Or an investor or expert in these sectors? Reach out to our team — we would love to connect.
