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It’s going to be a wild ride in the global lithium market

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It’s going to a wild ride in the lithium market. Global lithium demand could go from around 190Kt in 2015 (flat to down on the past couple of years) to  maybe 340Kt by 2020, driven mostly be demand for batteries – both vehicle and storage.

Certainly the battery plants to use that much lithium will likely have built. Lithium [Li2CO3] prices have gone from  less than US$6000/t in  2014 to $US7500/t in the March  quarter this year to over US$10,000 /tonne in the June quarter.

It will take a lot of electric vehicle sales to fill up all the factories that have been built (see Fig 8 and Fig 9 below). It may well be that there is oversupply for a while in the pack market. That often happens in rapidly growing market. However, that overysupply tends to make the product cheaper to consumers as it sells below cost and that grows demand. The same thing happens in many markets, including the solar PV panel market.

In the longer term we expect the battery storage market to dominate over the electric vehicle market, but the requirements and chemistry may be different. Over the next five years it’s mostly going to be about how fast the EV market grows. That growth seems to be underpinned on both tightening CO2 standards in several countries (see Fig 5) and falling costs to the consumer.

Lithium is still only a small part of the overall battery market

Lithium still represents only a small share of the global battery market, but it’s where most of the growth and investment dollars are going.

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The reason for lead acid market share is the car and truck ignition industry but also forklifts.

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If we turn to the lithium cell market at the cell (not pack) level it was a about a US$15 bn industry in 2015, with the electric vehicle growing from next to nothing in 2010 to about US$5.5 bn last year.

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The standard battery in the lithium market, up until now is known as the 18650 cell and its price has gone from about US$0.55/Wh in 2010 to about $0.38 Wh in 2015 which is a pretty good rate of progress in this analyst’s opinion. Cell prices are down 80% over 10 years but the biggest part of the price fall at the cell level for this technology may already be done. Avicienne (an excellent consultant on the global battery market in this analyst’s opinion) forecasts that pack costs for electric vehicles  declined from $500KWh in 2014 to under $400 KWh n in 2015 and might  get to $270 KWh by 2020. Giddy up!

Electric vehicles are currently perceived to be a more important market than stationary storage

The reason is that much of the world does seem to be introducing higher CO2 emission standards for electric vehicles. The following chart is taken directly from an Avicienne presentation:

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Avicienne forecast  that by 2020 energy storage will represent less than 5% of the total battery market. We hope that this proves to be wrong.

The lithium demand, supply and price

We turn back to Orcobore [ORE] for a look at the lithium market from a supplier’s perspective. ORE expect lithium demand to grows from about 195kt in 2015 to perhaps 350 kt by 2020. Not all lithium goes into the battery market (yet) and the number of suppliers is relatively concentrated (with China being a large part). There are at least two ways to extract lithium and Ore has gone down the more unusual path of using brine. The main path used at the moment is “Spodumene” ore mining, concentration, roasting and acifidfication.

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As usual entrepreneurs (sometimes referred to as company management, sometimes as cowboys) get very excited when they see growth markets and build lots of capacity. The lithium battery market is no exception. The industry appears to be tripling its battery making capacity. Unless demand expands this fast battery prices will be under pressure. Still according to Avicienne the cost of factor expansion (per unit of annual capacity) has also declined sharply in recent years.

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ITK (that’s me) thinks that EV’s need to become most of the market by 2035 if the world is to decarbonize by 80% and do no worse than a 2C-2/5C warming. Even so it will take a lot more than Tesla Model 3 and Chevy Bolt to fill up those factories. Our quick back of the envelope calcs suggest that even if both models sell 0.4 m per year (based on Tesla pre orders for the Model 3) it would still be less than 50 GWh per year. Of course in another 10 years after that there will be a big replacement demand for these batteries, but that’s a long time to wait.

 

Figure 9: Battery demand from next wave EVs

Figure 9: Battery demand from next wave EVs

The energy storage market will eventually be easily the largest in the world

Of course as exciting as the EV market is, if every car in the world was fully electric, global electricity demand would increase by only about 30%. We base that on a rate of say 18 KWh per 100 km for fully EV.

On the other hand if we assume that wind can achieve average capacity factors (due to taller turbines) and PV about 25% (for a very rough mix of distributed and single axis tracking ground mounted) there  is still going to be an enormous demand for stationary energy storage by about 2035.

No-one  (in my opinion) has a reliable way to forecast how the big the market will be as it depends heavily on Government policy as well cost reductions. In turn the cost reductions depend on the rate of industry growth. Right now industry forecasts are for something like a 10-15 GWh global market by 2020.

However, this is still trivially small relative to global electricity demand. We plan to do some work on how big the storage market needs to be in Australia for an 80% renewable generation target, but it’s a hard piece of work.

David Leitch is principal of ITK. He was  formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.  

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  • neroden

    It’s always boom and bust in mining. Always.

  • juxx0r

    what do you reckon this means in english:
    “There are at least two ways to extract lithium and Ore has gone down the more unusual path of using brine. The main path used at the moment is “Spodumene” ore mining, concentration, roasting and acifidfication.”

  • Leigh

    “The energy storage market will eventually be easily the largest in the world” ..really? I never really thought of energy storage quite on that scale.

    • Stewart

      Taken together, all aspects of the new energy model, it certainly needs to be considered as per the quote. We are fortunate to be at that part of the cyclical wave that is the economy to see this new disruptive technology drive economics for a sustained period. It kind of fits in with the ‘long wave of accumulation’ model which sees economic development as a product of either endogenous or exogenous change. Whether Renewables and storage are ‘natural’ internal shifts caused by innovation (endogenous) or disruption caused by governmental policy (exogenous) is a moot point as it is now at the beginning of a tidal wave of institutional change. Ride the wave, I say, for as long as it causes the disruption to the energy economy.

  • Brunel

    Great research!

    Good to know the price of the raw materials for once – instead of the regular $145/kWh.

  • Dennis Abbott..

    I like lithium, it is used for batteries in my phone/ laptop and my cordless power tools.
    I also like the idea that one day my PV system could utilize lithium stationary storage.
    However, has anyone done a materials list, how much lithium is there? 90 million ff cars rolled of the production line last year, if we go in the EV direction, how many vehicles can be manufactured with a limited supply of lithium and how much will my next laptop cost. How much lithium is presently recycled, how much energy is required to recycle and does the process involve toxic chemicals. Will only the rich drive lithium powered EV’s .
    A possible global solution for transport fuel is Hydrogen, with modifications our present day internal combustion engined vehicles can run on clean fuel (direct fuel not fuel cells) Hydrogen is not going to run out.

    • juxx0r

      There’s no supply issue with Lithium. There is however an efficiency issue with hydrogen.

      • Dennis Abbott..

        Let us see what happens, short / medium and long term.

        • juxx0r

          There’s 600 years supply at current consumption rates in current resource estimates.

          Add in the Micas and we’ve probably got 1000 years supply at 2020 consumption rates.

          • Dennis Abbott..

            “At current consumption rates” The above article tells us that lithium is going to get rather popular powering EV’s and stationary storage. Every decade or so batteries will need to be replaced, adding to the rate of consumption. Population increases will also increase demand, industrial and traditional uses for lithium may also increase.
            Of course, a clean battery which is made from abundant materials and is able to scale up globally, may appear to power the 2 billion cars (worldwide) estimated to be on the road by 2035.
            .

          • juxx0r

            Yeah, massive issue there. Unless you’re concerned that we are going to run out of lead in 2025, silver around 2030, copper around 2040. bigger things to worry about than lithium.

  • solarguy

    Zinc-Bromine Gell batteries are compact, light, charge incredibly quickly and have pretty much the same performance as Li ion and promise to be cheaper too!
    There is no shortage of the materials. I’m betting on this chemistry to be a winner for all applications.
    In the mean time Lead Acid Gell cell’s and possibly Redflow’s battery for stationary for applications are competitive. And LA Gell are cheaper than Li ion, the chemistry is very well known and safe. You can get 14.6kwh of storage @50% DOD, for $12,000 which can give over 3000 cycles. On the odd occasion these can be discharged down to 80%, yielding 23.52kwh, without any real harm to the 3000 cycle life!

  • Ian

    What is the lowest cost possible for lithium batteries assuming a mature industry with sufficient raw materials supply and plentiful manufacturing capacity and an unlimited market with few marketing and distribution costs? How hard is it to make these things? has anyone estimated an end point cost for lithium batteries?