As the lithium market charts a course through a period of transition, marked by shifting demand dynamics and evolving industry landscapes, industry observers brace for a flurry of project delays and heightened merger and acquisition (M&A) activities. Insights from industry such Company as Stalwart Wood Mackenzie (Wood Mac) illuminate the unfolding narrative, shedding light on pivotal trends shaping the sector’s trajectory.
Principal analyst for lithium at Wood Mac, Allan Pedersen, underscores the palpable deceleration in erstwhile relentless demand growth for this vital battery material. This trend, attributed to market maturation and subdued electric vehicle (EV) sales, finds resonance in lower government incentives and infrastructure inadequacies expected to hamper EV sales in 2024. Projections indicate a modest 33% uptick in global plug-in EV sales this year, a notable departure from the robust 71% average yearly growth observed between 2021 and 2023, heralding implications for lithium demand.
A nuanced shift in lithium utilization patterns, driven by evolving cathode chemistries, further complicates the demand landscape. Wood Mac elucidates a burgeoning preference for lithium/iron/phosphate cathode formulations, characterized by reduced lithium content, outpacing the growth of high-nickel variants, exerting additional downward pressure on lithium demand growth rates.
While lithium demand has surged nearly threefold over the past triennium, reaching a zenith of approximately one million tons in 2023, the growth trajectory now stands poised for moderation. Pedersen aptly encapsulates the prevailing sentiment, describing the lithium market’s current milieu as tumultuous.
The crucible of market pressures bears down on the lithium supply chain, as declining prices weigh heavily on higher-cost sectors, notably large lepidolite operations in China and direct-shipping-ore supplies earmarked for processing and refining. Amidst this backdrop, companies grapple with a conundrum of production halts versus financial sustainability, with single-asset entities compelled to explore alternatives such as high-grading or expenditure reduction. In contrast, lithium majors endowed with diversified assets wield the flexibility to curtail production and optimize long-term asset value, amidst potential political influences on asset viability.
Wood Mac prognosticates a landscape punctuated by project delays and sluggish development as companies navigate the imperative to preserve cash reserves. Concurrently, heightened M&A activity looms large on the horizon, as lithium majors eye growth prospects and mining behemoths contemplate forays into the lithium domain.
Amidst these dynamics, the advent of several new resource and conversion projects in 2024 portends a fresh set of challenges, encompassing commissioning intricacies for mining ventures, resource variability for brine projects, and the precision chemistry requisite for refining operations to meet the exacting needs of the rechargeable battery supply chain.