Lithium Market Faces Key Challenges Amid Surging EV Demand

The lithium market is at the heart of the global energy transition, driven by soaring demand for electric vehicles (EVs). However, meeting this demand is fraught with challenges, including a looming supply deficit and substantial investment needs. Here, we explore lithium’s supply, demand, and price dynamics, and the critical investments required to address the “great raw material disconnect.”

Forecasts indicate a potential lithium deficit of 572,000 tonnes by 2034, seven times larger than current surpluses, according to Benchmark data. In 2024, over one million tonnes of mined lithium are expected, but this must grow to 2.7 million tonnes by 2030 to meet rising demand, particularly from the EV sector.

A significant bottleneck is the lengthy timeline for developing lithium mines, which can take 5 to 25 years to become operational. This misalignment with faster timelines for midstream and downstream facilities is termed the “great raw material disconnect,” threatening the battery industry’s ability to scale.

Benchmark estimates a $514 billion investment is required by 2030 to meet battery demand, with $220 billion for upstream projects and $51 billion specifically for lithium production. Western countries face higher costs and stricter environmental regulations compared to China, complicating investment efforts. Governments seeking to derisk supply chains from Chinese dominance may further inflate the required investment.

Major automakers are stepping up to secure lithium supplies. General Motors has invested $650 million in Lithium Americas’ Nevada mine, while Tesla is building a $1 billion lithium refinery in Texas. Companies like BYD and CATL are also establishing facilities and joint ventures to enhance production. Despite these efforts, a 1.8-million-tonne shortfall remains even if all planned projects come online, underscoring the need for new mines, refineries, and expanded production capacity.

Lithium Prices: Short-Term Volatility and Long-Term Stability: Lithium prices have been volatile, influenced by market dynamics and global supply-demand imbalances.

Short-Term Trends: S&P Global Commodity Insights projects lithium carbonate prices to average $10,542 per metric ton in 2025, down from $12,374 in 2024. Surpluses are expected to narrow, with a 33,000-tonne surplus forecast for 2025 compared to 84,000 tonnes in 2024.

Medium- to Long-Term Outlook: Analysts anticipate prices stabilizing between $15,000 and $20,000 per metric ton in the medium term, with structural deficits pushing prices higher. By late 2024, some experts predict prices may reach the low $20s per kilogram.

Producers are responding to oversupply by implementing supply cuts, delaying projects, and stockpiling. Albemarle and other major companies are scaling back high-cost operations, while projects like Arcadium Lithium’s Mt. Cattlin mine in Australia have been placed into care and maintenance.

Navigating Risks and Opportunities The lithium market faces risks such as volatile energy prices, geopolitical tensions, and lengthy mine development timelines. However, decarbonization efforts and the global shift to renewable energy create opportunities for low-emission products and stable pricing environments.

Major automaker commitments and government policies are accelerating EV adoption, driving unprecedented growth opportunities for the lithium sector. Tesla aims to produce 20 million EVs annually by 2030, while General Motors and Mercedes-Benz target fully electric lineups by 2035 and 2030, respectively.