How Much Lithium Will It Take to Become Carbon-Free?

Rechargeable lithium batteries are increasingly replacing fossil fuels. Meeting the growing demand for lithium has created its own extraction and supply chain challenges, but industry is figuring out how to address those. So now is the right time to ask: How much lithium production will be necessary to free us from dependence on oil? During our recent thought leadership webinar, Mark Ferguson, Director of Metals & Mining Research for S&P Global Commodity Insights, addressed this question. Read on to learn his predictions.

“Certainly, the demand for lithium is directly linked to forecast for plug-in electric vehicle sales and the battery-related demand for lithium that comes therein,” Ferguson noted. “But it's also, to a lesser extent, the expansion of battery storage for the expansion of the renewable energy sources, too. So if we just take a look at the plug-in electric vehicle-related demand, our forecasts are suggesting that vehicle sales could rise by a CAGR of 25.7 through 2027, very strong growth. And I think that really stimulated lithium prices in 2021, 2022, when those types of forecasts were indicating that the demand for lithium may not be met.

“Now, over the past year, we have certainly seen a supply response on the lithium side as new projects finally gain traction, work through some of the supply chain challenges that I mentioned earlier on. And so we have seen new supply coming online in Latin America as well as Africa, not to mention, some of the other countries, too.”

Bottom line, Ferguson said: “If we look ahead through to 2027, we anticipate the total lithium chemical consumption in the form of lithium carbonate equivalent to total just over 7.1 million tons. And so looking again at our supply-demand balances, we do anticipate supply to meet demand until approximately that time frame when the market could enter a deficit.”

Lithium is just one of several industry-critical metals for which Ferguson’s team has projected demand and costs over the medium term. Asked about projected capital expenditures for such mining projects, he said, “We expect this year there to be about a 4% fall in total capex spending across the commodities that we covered in that research. It's a bit beyond the critical minerals.” He added, “We anticipate another fall of about 1% next year. And this is really reflecting a lack of projects that have been committed to build as well as some of the weaker commodity prices that are hindering decisions by companies to move forward with projects.” More specifically, he said, “On the critical minerals side, in 2024, we actually anticipate a nickel capex to fall most sharply, certainly when compared to the likes of lithium and copper, which will both also record a modest decline, but certainly not nearly as much as that for nickel.”

To hear further insights from Ferguson on trends for lithium, nickel, and other metals, access our complimentary, on-demand webinar.

For a deeper outlook on the metals and mining sector, read our Big Picture outlook report.