Why Australia is expected to earn less from lithium as demand for EVs soars
Global demand for internal combustion engines is expected to flatline in the next two years as demand for EVs soars, but that doesn’t mean lithium exporters will earn more.
The value of Australia’s lithium exports is expected to fall after quadrupling to a record $19.5bn last year, as global production catches up with soaring demand for electric cars.
The Department of Industry’s latest Resources and Energy quarterly report shows the overall exports in the sector are set to decline from a record $460bn to $390bn, with energy exports expected earnings set to fall noticeably.
While prices are expected to moderate towards levels before Russia’s invasion of Ukraine early last year, the report also outlines the future of the internal combustion engine.
It expects the share of electrical cars sold in the passenger vehicle market to exceed 20 per cent by 2025, with China, Europe and the US leading the charge.
“As a result the global ICE (internal combustion engine) passenger vehicle fleet is forecast to plateau over the next two years, compared to the average of 3.3 per cent growth per year in the four years before the pandemic,” the Department of Industry report states.
The demise of the ICE will dent global oil consumption, which is forecast to rise 2.2 per cent to 102 million barrels a day in 2023, before slowing to average annual growth of 0.9 per cent in 2024 and 2025.
“The shift in the composition of the global vehicle fleet towards EVs will accelerate over time as EVs gain market share in new car sales, resulting in an accelerated fall in demand for petrol and diesel.”
But this isn’t expected to deliver a bonanza for Australian lithium producers in return, as global supply catches up with demand.
“The value of exports is expected to be $19.5bn in 2022-23, a significant increase from the previous record of $5bn in 2021-22,” the Department of Industry’s report states.
“The increase was driven by prices nearly tripling and the volume of spodumene exports increasing by 44 per cent. The value of lithium exports is forecast to decline to $17.8bn in 2023-24, then decrease further to $14.9bn in 2024-25.
“Global lithium supply is not only increasing but also diversifying, reflecting efforts by governments to secure supplies of critical minerals.”
The report highlights increased capacity from Chile, which is expected to maintain about 60 per cent of global refining output, as well as increased investments locally and in Argentina and the US. Recycling is expected to comprise 2-3 per cent of lithium supply within the next two years.
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