Fitch Solutions expects strong lithium production growth in the years to come with reserves continuing to increase, suggesting plenty of potential to boost supply in the long term.
The country-by-country forecast shows that global output is expected to rise by about 600,000 tonnes of lithium LCE between 2021 and 2025, compared with the 240,000 tonnes added between 2016 and 2020.
Fitch added that a production rise by 290,000 tonnes is anticipated between 2026 and 2030.
Fitch highlighted that these long-term estimates are on the conservative side, whereas production growth in Australia is set to almost triple over 2020-2030.
Despite the strong production growth, Fitch Solutions forecast the global lithium market to remain very tight in the coming years as the green transition accelerates, boosting demand for batteries spanning from EVs to utility-scale batteries.
Lithium supply will face a number of vulnerabilities, including geographical concentration at both the mining and refining level, as well as the limited presence of established and large mining players, which pose risks to the project pipeline execution.
Lithium can be extracted via several very different techniques. Currently only hard rock mines, located in Australia, Brazil, China and Canada, and ‘conventional’ brine resources from salars, located in Chile and Argentina, are used to produce lithium chemical products commercially at a large scale.
However, a host of new players are developing new extraction techniques, namely geothermal brines and sedimentary (clay) deposits, which could increase primary supply of lithium.
As these new extraction techniques make progress, the structure of the industry, shape of the cost curves and ESG considerations will continue to evolve.
The upcoming development of lithium recycling could also ease some of the lithium supply issues in the longer term.
The upstream lithium sector based on country-by-country production data shows that the top three producers Australia, Chile and China will likely remain top one, two and three producers out to 2030 based on the forecasts, and currently account for as much as 84 per cent of total global supply.
As lithium is now considered a strategic mineral, it is likely to experience rising government intervention, either to secure this strategic material, boost local production or to benefit from strong fundamentals by raising taxes or control over the sector.