Persistent shortages of lithium over the next decade will lead to fewer car sales and hit the cheaper end of the market hardest, the head of one of the biggest producers of the vital battery metal has warned.
Paul Graves, chief executive of Pennsylvania-based Livent, said the lithium supply crunch as demand roars would lead carmakers to prioritise material for their more profitable models.
“If you take those forecasts of demand or conversion of sales, then we can never expand lithium supply quickly enough to catch up,” he told the Financial Times. “We see no situation where there will be enough lithium to supply all the corners of demand.”
Graves, whose company is a supplier to Tesla, General Motors and BMW, warned that the problem meant it would take longer than policymakers expect to phase out internal combustion engine cars, and that “low-cost vehicles will be the challenge”.
The comments from the former Goldman Sachs banker echo those of Carlos Tavares, head of Jeep and Peugeot owner Stellantis, who has argued that emissions legislation will push up car prices and squeeze the middle class out of vehicle ownership.
Formed in 2019 as a spin-off from US agricultural chemicals producer FMC Corporation, Livent is seeking to break into the top ranks of lithium companies.
It aims to increase lithium carbonate production capacity in Argentina to 100,000 tonnes by 2030, up from 20,000 tonnes in 2020, and owns a stake in Nemaska Lithium, which is developing a hard rock project in Quebec.
The lithium market is set to grow from 700,000 tonnes of lithium carbonate equivalent this year to more than 3mn tonnes by 2030, according to Fastmarkets, a pricing agency.
McKinsey estimates that 15 per cent of lithium demand will be unfulfilled even if all projects under development come to fruition.
Lithium prices have jumped 10-fold in just under two years as electric car sales have taken off, while new supply has been muted following a glut in 2019. Underlining the boom, Chile’s SQM this week reported a 10-fold increase in net profit to $2.8bn in the nine months ending September.
Lithium projects led by companies outside of the industry’s “big four” — Albemarle, SQM, Ganfeng and Tianqi — have generally taken far longer to deliver than management teams have promised.
Lithium mining equities took a hammering this week with Albemarle and SQM both shedding about 15 per cent on unconfirmed reports that Chinese cathode producers were lowering output forecasts in a sign of cooling demand for EVs in the world’s largest market.
Seth Goldstein, analyst at Morningstar, agreed that lithium supply would struggle to keep up with forecast 20 per cent annual growth in demand over the coming decade, pushing carmakers to sell more hybrid vehicles.
“I believe the market will remain structurally undersupplied for the next decade,” he said. “This is once-in-a-century strong growth for a commodity like we saw with aluminium 100 years ago or oil when combustion engine vehicles were taking off. The sustained high demand growth is going to leave supply scrambling to catch up.”