The increasing popularity of electric vehicles (EVs) is the primary driver of lithium demand, ahead of electronic storage devices like phones, tablets, and grid storage. The growth in the EV market has significantly influenced the demand for lithium, with forecasts predicting a rise to one million metric tonnes by 2025.
Currently, global lithium prices remain low, having experienced only minimal rebounds since their decline in late 2022. This situation is largely due to a slowdown in EV demand. In the UK, the proportion of new cars sold that were electric rose rapidly from 3% in 2019 to 19% in 2021, according to IEA global EV data. However, by 2023, this figure had only reached 24%, tempering earlier expectations for a dramatic increase in lithium demand.
During the same period, the supply of lithium has significantly outpaced demand, with global reserves growing from 17 to 28 million metric tonnes by 2023. Around 70% of these global reserves are concentrated in Chile, Australia, and Argentina, with Chile holding the largest share at an estimated 9.3 million metric tonnes, followed by Australia with 6.2 million metric tonnes.
The global market value for lithium is projected to grow by 130% to nearly $19 billion by 2030. Prices are expected to rise as the availability of commercially viable supplies, which can be mined profitably, decreases. Most of these economically viable reserves are found in Australia, Chile, China, and Argentina.
Electric vehicles are crucial to the UK government’s net zero targets. The UK has banned the sale of new petrol and diesel cars from 2035, a revision from the original target of 2030. This change reflects a global reduction in enthusiasm for the substantial investment required in public infrastructure. The UK’s revised timeline aligns with those of France, Germany, Sweden, and Canada. These adjustments balance ambitious environmental goals with practical considerations such as economic growth, technological readiness, and public acceptance.
However, for the UK government and other global nations to achieve net zero, investment in green technology must increase significantly and rapidly. At present, sufficient incentives for such investment are scarce. Sheena McGuinness, RSM UK’s head of renewables and cleantech, comments that the UK tax incentive and wider tax landscape are not yet where they need to be to effectively support the energy transition.
While lithium demand is driven by the quest for cleaner energy sources, the carbon footprint of lithium mining must be considered. Estimates of the reduction in carbon emissions from using EVs compared to petrol or diesel vehicles vary widely but are generally between 50% and 80%. However, mining a tonne of lithium generates 15 tonnes of carbon emissions. This, along with other environmental impacts such as water usage, diminishes the green benefits of EVs.
A reliable supply of mined lithium, alongside other rare earth elements and mined resources like cobalt and manganese used in renewable batteries, is essential for the energy transition. To fully support carbon emission reductions, investment in the infrastructure needed to maximise the lifespan of lithium is crucial. Currently, the UK exports lithium from car batteries at the end of their life rather than repurposing them for renewable energy storage. A battery retired from a car typically has 70 to 80% of its original capacity, which is limiting for mobile storage but less problematic for stationary applications.
While the outlook for growth is positive for the lithium industry, significant changes lie ahead. David Hough, co-head of energy and natural resources, notes that lithium prices remain prohibitively low, posing an obstacle to net zero targets by disincentivising mine development. He anticipates prices will rebound as demand increases and the availability of new petrol and diesel vehicles diminishes in the coming years. The next UK government needs to support investment in mining battery metals through competitive capital markets and favourable incentive regimes for related technology to secure future supply.
Firering Strategic Minerals plc (LON:FRG) is an AIM-quoted mining company focused on becoming a near-term cash generating producer of Quicklime, through their Limeco Project in Zambia, whilst at the same time progressing with the exploration and development of their Atex Lithium Project, Côte d’Ivoire.
