UBS conference: EVs face lithium bottleneck on rising demand
The electric cars market will need ‘every single unit of lithium to come out of the ground’ to meet anticipated demand, but big challenges exist.
The accelerating global demand for electric vehicles will need “every single unit of lithium to come out of the ground” but a number of hurdles exist, experts say.
“The biggest difference that I see between now and in the future is today we need a lot of lithium and in the future, we’re gonna (going to) need a lot more lithium,” Anthony Tse, director of Canadian battery recycler Li-cycle said at the UBS Australasia Virtual Conference on Tuesday.
The International Energy Agency says there were 10 million electric cars on the world’s roads at the end of 2020, following a decade of rapid growth.
Australia is at a nascent stage of the demand cycle, accounting for just 0.78 per cent of total global EV sales in 2020, but policy initiatives are being rolled out to support its growing popularity and fast-track the country’s catch-up to trends in China, US and Europe.
“Any way you look at the demand-supply curve, I think we’re gonna need every single unit of lithium to come out of the ground in order to satisfy that growth going forward,” Mr Tse said.
“I think what we see in Europe and the US is essentially going through the same cycle that we saw in China about five years ago, so they’re obviously going through an initial kind of policy push phase (to EVs).
“The interesting thing is whether you are going through a policy-push phase or demand, some of the numbers are actually becoming very real and some of those incremental demands for lithium units on a yearly basis are becoming very lumpy as well.”
He said third-party outlook forecasts project the potential EV demand is anticipating orders in the magnitude of somewhere between 100,000-150,000 tonnes incremental lithium units that need to be brought online each year.
“About ten years ago that was the equivalent of anywhere between five to seven new lithium projects that actually have to be brought online every single year, but not only bought online, but have to be performing at a 100 per cent production capacity on day one or January the first of that year. And that is an immense challenge,” Mr Tse said.
“And by the way, that 100-150,000 a year increment has to be maintained at pace at cadence for the coming decade.
“What I think it would mean for existing producers is ... a greater impact and emphasis on emissions, water intensity, energy intensity, you know, for certain resources, obviously, waste and waste management will be important.”
Besides environmental, social and governance challenges through the automotive supply chain, recycling demands and cost pressures, there was also a looming shortfall of talent and experience in a young industry with a “finite number” of people.
“Some of that talent is not necessarily fungible. You know, for instance South American lithium kind of talent may not necessarily be so applicable to hard rock projects in Australia.”
Managing talent and the ESG performance of the industry going forward were some of the “front of mind” challenges.
Tianqi Lithium Australia, which is targeting lithium hydroxide production at a facility in WA, is predicting more commercial and technical collaboration ahead as the industry overcomes critical demand-supply challenges.
“I think the biggest challenge is quantity on time at the right quality,” said Ron Mitchell, Tianqi Lithium Australia’s international business group director.
He said automotive OEMs had been surprised at the popularity of EVs.
“So we look at China, you know, they’re forecasting around 3 million unit sales this year, up from about 1.2 million last year, and the forecast for next year up around 5 million,” Mr Mitchell said.
“I’m not surprised at the current price cycle (of lithium), I probably am surprised at how quickly it has run up.
“But there are some real challenges in the industry in bringing new supply to market.”
Looking forward, sustainability and getting projects to market “at the right quality” would not be easy.
“There are geopolitical issues that need to be considered and jurisdictional disadvantages for some of these assets to be developed.
“I think in the past, there’s been some very optimistic views on bringing projects to market at the right quality point and that is a big challenge.
“So it’s one thing developing a resource, it’s another thing entirely to refine a material to the requirements of, you know, the electric vehicle industry.
UBS Asia analyst Tim Bush said on the EV battery journey “all roads are going through lithium”.
“My biggest concern is definitely, you know, will lithium become a bottleneck to global electrification,” Mr Bush said.
“We’re definitely seeing battery makers and the midstream cathode makers look to secure lithium through a combination of offtake agreements and direct investment into those resources.”
Tesla’s move to lithium-iron-phosphate (LFP) batteries was also indicative of a wider push to launch more affordable “mass” EVs to keep up with its growing popularity.
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