Analysis of Lithium Markets and North American Projects

The lithium market has experienced extreme volatility and prices are at a cyclically low level following Chinese oversupply. Lithium production is concentrated in Australia and Latin America, with processing dominated by China. Given lithium’s superior energy density, it is a key component of electric batteries, and has witnessed rapid demand growth, driven by battery usage in EVs and in stationary energy storage applications. Alarmed by Chinese dominance of the battery supply-chain, the Western governments now view lithium to be a “critical mineral” and are engaged in moving the supply-chain closer to North America and Western Europe. The lithium industry is now experimenting with the commercial extraction of lithium from relatively low-concentration brines in NAM.

In the full report, we study (1) The demand/supply environment for lithium, (2) Key lithium exploitation basins in NAM (3) Important data regarding the various Canadian and US projects, and (4) Key risks to the centricity of lithium in battery production. 

Highlights: 

Lithium Prices Are Cyclically Low
Lithium prices are experiencing significant weakness, with LCE price averaging in the US$10,000/T-US$12,000/T range, after rising as much as US$80,000/T in 2022. Spodumene prices have fallen to their lowest levels since August 2021, dropping to ≈US$800/T FOB Australia versus peak levels of US$6,400/T level in December 2022. Our channel checks suggest that a 165,000T LCE inventory has built up in China, and until that is absorbed, prices will likely remain weak. Industry insiders expect recovery in H2/25. In our view, the current lithium prices are unsustainable, and not only do they not justify investments into new supply, even some current supply is uneconomical. Given that lithium demand continues to increase, and incremental supply additions will be needed, we believe that a more sustainable lithium price level is in the US$20,000-US$25,000/T LCE level. 

Lithium Demand Linked to EVs
The main demand driver for lithium has been Li-ion batteries, with demand linked to EV sales and to stationary energy storage applications. Lithium market is estimated at nearly 1mmT LCE for 2024, and we project demand to increase to nearly 2.7mmT LCE by 2030 (15% CAGR) and to 4.0mm T LCE by 2035 (12% CAGR). Some forecasters project even higher CAGR for lithium demand. 

Many Lithium Extraction Projects are Under Consideration in NAM
At least 30-40 lithium projects are being considered in NAM, with some geared towards extraction from hard rock, while most are targeting DLE technology for extraction from geothermal and oil and gas brines. Initial estimates of capital and operating costs per unit of annual production vary sharply for the various projects, but most are not economical at the current lithium prices. However, some projects generate 20%+ IRR at prices in the US$20,000/T-US$25,000/T LCE, while others may need prices in the ≈US$30,000/T LCE or LHM to generate attractive returns.  

NAM Lithium Projects Present A Paradox of Sorts
The US and Canadian governments view lithium to be a critical mineral, and the US government in particular has various financial incentives in place to develop a NAM-based supply of EV batteries and critical minerals. The lithium projects that we list in the report require initial capital investment of at least $19bn, and perhaps significantly more. Given sharp variations in cost estimates, not all projects will likely reach the finish line, and projects may need government help. Advantaged projects would have a large resource base, attractive cost structure, secured government support and takeaway agreements with customers.