After falling in 2020, global lithium output is expected to increase by 9.6% in 2021 to 89.9kt, before more than doubling over the next four years to reach 183.4kt in 2025, helped by the increasing demand for electric vehicle batteries.
Australia and Argentina will be significant contributors to the overall growth in 2021. While Australia’s production will be supported by miners returning to regular operating levels alongside a strong improvement in the lithium market conditions, Argentina’s production will be supported by production resumptions at mines that were previously suspended.
Overall, rising prices, as well as increasing battery demand for EVs, will be the driving factors for growth in lithium production in 2021. After declining by 37% in 2020, the lithium carbonate FOB North America prices have recovered strongly in 2021 and are forecast to average $15,775/t, according to GlobalData, driven by growing EV battery demand. In 2020, prices declined to $8,000/t, owing to the Covid-19 lockdowns and restrictions that disrupted demand, causing volatile price movement. Meanwhile, China’s lithium carbonate spot price is expected to rise to an average of $14,000/t in 2021, up from an average of $7,100/t in 2020.
The global lithium demand and supply gap narrowed to 26kt in 2020, primarily due to an increase in demand for electric vehicles, especially during the second half of 2020. However, the gap is likely to expand in 2021 and remain for the next few years, owing to the commencement of various key upcoming projects including Kathleen Valley, Cauchari-Olaroz, Mount Finniss and Salar del Hombre. Previously, the global lithium market surplus increased from 2.7kt in 2016 to 48kt in 2018 before falling back to 26kt in 2020. The surge in production was due to eight operating mines that accounted for the majority of the global output. In 2020, to mitigate the risk of both oversupply and weak demand due to Covid-19, leading Australian lithium miners announced measures to postpone additional capacity development. For example, Tianqui Lithium has kept the commissioning of its 24kt lithium hydroxide plant in Kwinana on hold, while Albemarle postponed the commissioning of a 100kt plant in Kemerton, Western Australia to late 2021.
Looking ahead, GlobalData anticipates substantial growth in lithium production in the upcoming years. New mines and capacity expansions are forecast to boost the global lithium production to 183.4kt in 2025. Most of this growth will originate from Australia, with the existing mines ramping up production such as Mount Cattlin and Pilgangoora. Additionally, the expansion of Greenbushes Lithium Operations, as well as the resumption of Wodgina, which are both expected to occur by 2023, will further boost output. Other key upcoming projects include Kathleen Valley, Cauchari-Olaroz, Mount Finniss and Salar del Hombre.