The Lithium Challenge: Metals and Mining Sector at the Core of Enabling Energy Transition

Batteries are expected to account for 95 percent of lithium demand by 2030 – lithium is the driving force behind electric vehicles.

Scenario: Despite COVID-19’s impact on the automotive sector, electric vehicle (EV) sales grew by around 50 percent in 2020 and doubled to approximately seven million units in 2021. At the same time, surging EV demand has seen lithium prices skyrocket by around 550 percent in a year: by the beginning of March 2022, the lithium carbonate price had passed $75,000 per metric ton and lithium hydroxide prices had exceeded $65,000 per metric ton (compared with a five-year average of around $14,500 per metric ton).

There are expectations that lithium demand will rise from approximately 500,000 metric tons of lithium carbonate equivalent (LCE) in 2021 to some three million to four million metric tons in 2030.

Over the next decade, according to McKinsey, there will be continued growth of Li-ion batteries at an annual compound rate of approximately 30 percent. By 2030, it says, EVs, along with energy-storage systems, e-bikes, electrification of tools, and other battery-intensive applications, could account for 4,000 to 4,500 gigawatt-hours of Li-ion demand.

So will there be enough lithium to cover the needs of a new electrified world?

Currently, almost all lithium mining occurs in Australia, Latin America, and China (accounting for a combined 98 percent of production in 2020). An announced pipeline of projects, says the global consulting firm, will likely introduce new players and geographies to the lithium-mining map, including Western and Eastern Europe, Russia, and other members of the Commonwealth of Independent States (CIS) aka Central Asian States. “This reported capacity base should be enough for supply to grow at a 20 percent annual rate.”

According to their report, direct lithium extraction and direct lithium to product offer significant promise of increasing lithium supply, lowering costs, and reducing the industry’s environmental, social and governance footprint.

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The energy transition needed to smooth the world’s decarbonization pathway presents unique challenges. Raw materials will be at the center of decarbonization efforts and electrification of the economy as the world moves from fossil fuels to wind and solar power generation, battery- and fuel-cell-based electric vehicles (EVs), and hydrogen production. Metals and mining companies will need to innovate and rebuild their growth agenda, as demand for raw materials is set to soar.

Content aggregated (with edit) from:
https://www.mckinsey.com/industries/metals-and-mining/our-insights/the-raw-materials-challenge-how-the-metals-and-mining-sector-will-be-at-the-core-of-enabling-the-energy-transition
https://www.mckinsey.com/industries/metals-and-mining/our-insights/lithium-mining-how-new-production-technologies-could-fuel-the-global-ev-revolution
https://www.mckinsey.com/featured-insights/coronavirus-leading-through-the-crisis/charting-the-path-to-the-next-normal/these-countries-are-driving-lithium-production