Interview Synopsis

Lithium value chain – demand growth and supply chain bottlenecks

  • Public Equity
  • Materials
  • Europe

In July, Tesla Chair Robyn Denholm called for the lithium industry to “scale at sprinting pace” as fears over supplies of the chemical element continued to grow. According to a former senior executive at Benchmark Mineral Intelligence Ltd, supplies of lithium have already “entered a deficit”, which could last until 2025.

Lithium supply to remain tight until 2025

In an Interview with Third Bridge Forum, the specialist said they are more concerned about the supply of lithium than cobalt, nickel and graphite. They disagree with the view from many investment banks that the market is going to ease in 2024-2025 and that “every single unit” of lithium extracted is needed. Click here to read our Q2 Quarterly Trends Report discussing this topic. 

The specialist told us electric vehicle (EV) production will likely be affected by the lithium chemicals deficit. We heard OEMs expect to produce approximately 11 million EVs in 2023, 14 million in 2024 and 17 million by 2025, and that these estimates will need to be revised in light of the current constraints. 

The lithium market is likely to remain tight until new extraction and processing technologies become more available, according to the specialist. New lithium mines in areas such as Argentina are also unlikely to come to market before 2025, further tightening supplies, we heard. The specialist said Argentina has an “easier legal framework” compared to other new supply areas such as Chile and Bolivia. Australia, which accounts for half of all unprocessed supplies of lithium but only 7% of refined lithium, is another important market that could produce 450,000 metric tonnes by 2025. However, the expert told us USD 41bn of investment would be needed over the next five years to satisfy demand.

Meanwhile, the specialist said the current mix of contracts could catch up with price reporting agencies, and predicted that lithium will cost USD 100,000 per tonne by the end of the year. They also told us that despite it being a “sellers market”, cathode manufacturers have a “very strong” relationship with lithium chemical producers because of their “good understanding” of specifications.

Over the coming years, the specialist expects the supply of lithium to increase from markets such as Australia, Argentina, Bolivia, Chile and China. However, in the meantime, they foresee rising prices and continued supply constraints. 

Click here to access all the human insights in Third Bridge Forum’s “Lithium Value Chain – Demand Growth & Supply Chain Bottlenecks” Interview.

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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