Written by 11:19 am EU Investment

Boom in lithium production expected over the next decade

Global lithium production is expected to grow from 503 500 t lithium carbonate equivalent this year to 2.1-million tonnes in 2031 – an average yearly growth rate of 15.9%, says market research and advisory firm Fitch Solutions Country Risk & Industry Research.

There were a significant number of new projects in various stages of development around the world, with Fitch Solutions tracking 120 established and new projects globally, and expecting that number to grow as interest in the sector increased, Fitch Solutions commodities analyst Nick Trickett said during a briefing on September 8.

“Broadly speaking, global supply is positive across a number of countries and expected growth in production is the result of increased exploration over the past 20 years that led to continuous growth in global reserves and resources,” he pointed out.

For example, production growth will accelerate in Australia, which is forecast to remain the largest lithium producing country to 2031, and to triple its output to 750 000 t. Similarly, Chile and China will more than double their output, and Argentina’s production will rise almost six-fold to make it the second-largest global producer, up from its current position as fourth-largest.

Additionally, in Canada, domestic policy and the passage of the Inflation Reduction Act in the US were expected to accelerate investment, he added.

“We expect established lithium-producing countries will record further growth, while a notable number of new lithium producing countries will emerge and cumulatively account for a larger share of global output. These new countries include mostly developed markets, such as the US, Canada, Germany and some European countries alongside developing countries, such as Zimbabwe, Mali and the Democratic Republic of Congo (DRC).”

Fitch Solutions’ forecast for the strong boost in lithium output was underpinned by a large number of lithium extraction projects in pipeline over the coming decade, Trickett said.

The largest number of new projects are expected to be in the Americas, including Canada, Argentina, Chile and the US, as well as in Asia-Pacific, which includes Australia and China.

The large majority of new projects are located in stable and mining-friendly jurisdictions. A very large number of new projects are also owned by junior miners, raising questions about the development of these projects in terms of financing and final investment decisions.

Merger and acquisition activity is expected to pick up over the next decade and will likely result in junior miners being bought out by larger firms to finalise the development of projects.

Meanwhile, Asia-Pacific is set to contribute most growth in absolute terms over the next decade, with the region forecast to add an additional 608 000 t between 2021 and 2031, significantly above South America, which will add 432 200 t.

However, growth of 185.4% over next decade in the Asia-Pacific region will be slowest of the regions, outpaced by South America with 274%, and compare with other regions that are starting from a very low base.

Further, Asia-Pacific’s share of global production would fall from 65.15% in 2021 to 44.3% in 2031, as South America was forecast to contribute 28% of global production, and North America was set to expand its share to 13.8%. This was owing to the strength of the existing project pipeline in the Americas, including in Argentina, the US, Chile and Canada, he noted.

Fitch Solutions’ forecast sets out that Asia-Pacific’s lithium production will average 9.7% annual growth over the next decade, with the Americas averaging 37.1% growth and South America averaging 11.9% growth over the decade.

Australia will contribute 511 300 t additional production over the coming decade at an average yearly growth rate of 12.1%, ahead of China with 96 700 t at a 7.7% yearly growth rate.

“By 2031, Australia will hit 80% of regional production and alone will be responsible for 35.5% of global output,” Trickett said.

Additionally, brine extraction in the Americas was highly profitable owing to its low cost of production and Fitch Solutions expected investors would want to keep on the lookout for lithium exploration projects in the region, he added.

The Americas’ share of global production will rise from an estimated 32.6% in 2021 to peak at 43.5% in 2027. During this period, the region will add the most additional production of any region in the world.

However, after this, its share would fall slightly as growth was outpaced by global growth of production in other parts, Trickett noted.

“Argentina is the region’s brightest spot, where we expect production to soar. We expect production to ramp up rapidly in the coming years owing to the very strong project pipeline.

“In total, the government expects $4.2-billion worth of investment in the country’s lithium sector over the next five years. We expect there will be further investments in Argentina’s lithium sector by international players in the coming years as well.”

North America would also be a major engine of growth and had seen substantial levels of investments. Fitch Solutions’ estimates suggested that the US and Canada produced a combined 6 400 t of lithium carbonate equivalent in 2021, but the region was set to become a major producer by mid-decade and production was expected to total 291 000 t/y by 2031, said Trickett.

Meanwhile, Europe was set to become a new regional hub for lithium extraction, driven by policy initiatives, and the Czech Republic, Austria, Germany, Finland and Portugal havd significant potential, he highlighted.

“The European Union (EU) aims to meet 80% of lithium demand by 2025 and low-carbon direct lithium extraction from brines have bright prospects. Europe has significant lithium resources in mineral and brine form, and holds potential in terms of new, more sustainable and faster lithium extraction technologies.

“For example, the Vulcan Energy Resources zero-carbon lithium project will bolster Germany’s potential to become a leading regional producer of sustainable lithium. Germany’s upper Rhine valley also holds promising lithium opportunities and should prove compatible with EU environmental agenda,” he said.

Additionally, many lithium extraction projects in Europe also include plants and downstream investments to refine lithium into chemicals, highlighting its aim of reducing its reliance on China for mid- and downsteam lithium chemical refining.

“Further, Africa is expected to remain a global laggard in terms of absolute production of lithium in the coming decade, but we expect to see an increase in investments, as the region offers an avenue for diversification.

“It is also expected that mining firms will broaden exploration activities, and countries such as Zimbabwe will remain the largest regional producer in the short term. The DRC is set to become a globally significant player when the Manono project comes online,” said Trickett.

Sub-Saharan Africa was also expected to record strong yearly output growth of 32.8% for the forecast period, but would end up producing similar volumes to Europe, he added.

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