Powering Down: Will Lithium Supplies Fail to Meet Demand?

Apple's CFO Luca Maestri recently predicted a loss of sales between $3 and $4 billion for this quarter due to the limited supply of semiconductors and advanced chips. Add Tim Cook to the list of leaders in tech who have recently expressed their concerns over the looming shortages.

And Mr. Cook may have reasons for further concern: a lithium disruption lies ahead.

As the automotive industry continues its deep dive into EVs and consumer tech demands continue to rise, the lithium used to power these devices could become short in supply by 2027—with available supplies being marked up and beyond reasonable prices.

The problem begins with available methods of lithium extraction.

The global lithium mining capacity is expected to not be able to meet demand unless new investments accelerate the mining processes. Without added mining capacity for lithium, deficits in supply could triple lithium prices by the end of 2029.

To add to the issue, today's lithium mining capacity satisfies current demand, leading to complacency within the supply chain. Yet the explosive rise in EV demand has set the industry on course for a lithium supply disruption by 2027. The deficit in lithium supply could cause delays for the production of millions of electric vehicles and potentially consumer electronics as well.

Even if mining capacity is added, Rystad Energy estimates it could take up to 7 years to develop, build, and finance new lithium mining facilities.

Looking at current lithium mining capacity and lithium demand created by EVs, a deficit in lithium supplies could potentially create a production delay of nearly 3.3 million EVs. Without added mining capacity, that number could grow to 9 million EVs delayed in 2028 and nearly 20 million in 2030.

Let's take a break for a live look at the automotive industry, right now:

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The future deficit in lithium supply and demand will not only impact EVs.

Expect shipping, aviation industries, and grid storage to also feel the negative effects of scarce lithium supplies.

With lithium, we can recall an old question asked by every Economics 101 professor ever: what is the difference between scarcity and rarity?

Lithium is not rare. It's widely available in the ground and even in the sea. As of now, it is not scarce. A commodity only becomes scarce once its supply fails to satisfy its demand. So, when will lithium become scarce? Let's take a look below—

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The market uses "LCE" (lithium carbonate equivalent) as its unit of measurement for lithium production. LCE is being produced at nearly 520,000 tonnes, while the current demand is estimated to be around 300,000 tonnes in 2021.

Yet demand is expected to grow, and grow fast.

By 2025, LCE demand will reach a hair over 1 million tonnes with LCE mining capacity just avoiding a deficit at 1.3 million tonnes of production.

As shown in the graph above, a "crossover" is expected to occur sometime in 2026, where lithium battery demand will surpass available lithium mining capacities.

Without any added mining capacity, an 820,000-tonne deficit in demand vs mining capacity is expected to occur by 2028. The deficit could then rise to 2 million tonnes by 2030. But that is the most pessimistic outcome, right?

According to the EU and US, it is. Governments across the globe are already aware of the potential lithium disruption, and the current semiconductor and chip shortages are creating further calls for increased awareness for future supply chain disruptions. Ongoing projects in North America and Europe currently work to test new processes for "direct lithium extraction." These processes use a combination of chemicals and electricity to separate lithium from its carrier materials, which could remove the need to rely on older methods of extraction currently used in South America where brine-based processes are used to recover lithium.

Additionally, increased efforts in recycling older lithium supplies could also boost lithium capacity in the future. In 2021, only 5% of lithium battery packs undergo a recycling process. The other 95% head to landfills and who knows where else.

And what if I told you that seawater could prevent a lithium supply disruption?

An estimated 180 billion tonnes of lithium are present in the world's oceans. The trouble? It's heavily diluted within the water, representing 0.2 parts per million.

That hasn't stopped researchers. Myriad filtering techniques have been derived to extract lithium from the seawater. Yet these methods are not economical or efficient. Too much lithium is lost.

Advancements have been made using selective electrode-filtering processes, but these attempts still do not rival the efficacy and economy of on-land mining for lithium. However, the approach may still offer a method of recovering lithium from discarded batteries. After all, the current recycle rate of lithium is a mere 5%. Any processes able to bump up that number are a good start.