The Lithium Boom - An Analysis Of Future Demand Vs. Supply

by: Matt Bohlsen


Lithium demand to 2025 with modeling of EV adoption.

Lithium supply to 2025 - miner by miner.

Lithium could be in short supply after 2020 unless the juniors are developed.

In this article, I share some of my research modeling on the lithium demand and supply through to 2025.

Readers should understand that this is a work in progress, and the numbers will be adjusted as the actual numbers come in each year. Also there are several forward estimates, to give myself and investors some idea where we may be heading. Rather than attack my estimates and model, I would suggest you build your own model, and then you can work on what estimates you think are correct. You can also read some of McKinsey's research on lithium battery prices falling here. Finally, remember when you read about how much lithium (metal) in an EV, you need around 5.3 x more than that amount of LCE to create the lithium metal. That is, 1g lithium metal = 5.329g LCE.

Lithium Carbonate Equivalent (LCE) prices in China

Click to enlarge


In 2016, LCE prices rose sharply in China, due to increased demand and scarcity of supply. This led to contract lithium prices moving up to around USD 13,000/t LCE, and for smaller off contract buyers in China, the prices reached USD 22,000/t LCE. This was largely due to lithium battery supply in China tripling in 2015, as electric vehicle (NYSE:EV) sales surged.


As an exercise (in the table below), I have taken my EV adoption forecasts from my previous article, "Electric vehicles will be affordable and popular by 2020 - An EV portfolio to consider."

These are based on around 50% pa growth in the EV market with some acceleration in the early 2020s when EV prices become very appealing. EV sales grew globally by around 50% in 2014 and 2015, and 223% in China in 2015. 2016 world sales are up 48% YTD, and heading towards 800,000 for the year.

I have also relied on some of the research from Tony Seba, for example, the fact that lithium battery costs have been falling around 14% pa, and are expected to fall around 16% pa for the next decade. If you don't believe battery prices will fall, then the model breaks down, as this is (in my view) the key to lower EV prices, and hence greater EV adoption. You can view Tony Seba's video here.

My forecasts for EV selling prices and global EV market share as a % of all global new vehicles sold

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

60kWh EV

sell for ($,000)

37.5 33.9 30.9 28.3 26.2 24.4 22.9 21.6 20.6 20
EV market share (%) 1 2 3 6 10 20 30 40 50 60
Click to enlarge

NB: The above figures don't include EV subsidies. Each year refers to the end of that calender year.

As stated above, you can make your own model and insert the market share percentages that you think are likely.

The ICE companies are all moving towards EVs and fast

Ford (NYSE:F) is spending USD 4.5b to add 13 new EV models to electrify 40% of its vehicle lineup by 2020. My model is only at 10% by 2020. Recently, the President of General Motors (NYSE:GM) wrote: "At General Motors, we see the future of the automobile and vehicle ownership being far different than it is today. Vehicles will be electric, connected, self-driving and shared."

General Motors has the Bolt coming in 2016, Nissan (OTCPK:NSANY) has the Leaf, Toyota (NYSE:TM) the Prius, Mitsubishi (OTCPK:MSBHY) the Highlander. Others with EVs include Volkswagen (OTCPK:VLKAY)(Audi/Porsche), BMW (OTCPK:BAMXY), Daimler Mercedes Benz (OTCPK:DDAIF), Renault (OTC:RNSDF), Volvo (OTCPK:VOLVY), Mazda (OTCPK:MZDAF), Honda (NYSE:HMC), Hyundai (OTC:HYMTF), and Kia (OTC:KIMTF).

Lithium demand

  • Goldman Sachs (NYSE:GS) state: "A Tesla model S with a 70kWh battery uses 63 kilograms of Lithium Carbonate Equivalent (LCE). This would be the same as a 60kWh EV requiring 54kgs of LCE."
  • Goldman Sachs also says, "for every 1% increase in battery electric vehicle (BEV) penetration, there is an increase in lithium demand by around 70k tonnes (NYSE:T) of LCE/year."
  • Other technical experts say an EV battery requires around 2.5kgs LCE per kWh. This means the 70kWh Model S would require 175kgs of LCE, or the 60kW model 3 would require 150kgs.

I will work from the following assumptions going forward to 2025:

  • Going forward to 2025, battery electric vehicles (OTCPK:BEVS) will become the dominant player and 60kWh batteries the average.
  • 54kgs LCE per 60kWh EV, taking the lowest measure from above, to keep my results more conservative.

My model for lithium demand 2016-2015

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Estimate number of EVs sold globally ('millions)

0.75 1.5 2.25 4.5 7.5 15.0 22.5 30.0 37.5 45.0

LCE required if 54kgs for a 60kWh EV (ktpa)

40.5 81 121 243 405 810 1,215 1,620 2,025 2,430

LCE demand for all industries (ktpa)

210 268 327 469 653 1,083 1,516 1,951 2,389 2,830
Click to enlarge

NB: 1 tonne = 1,000kgs, ktpa = thousand tonnes per annum


  • Estimate number of EVs sold globally = % EV penetration (from my earlier table) x 75m (based on 75m conventional cars expected to be sold in 2016). Note I have not increased this number each year but left it at 75m to be conservative.
  • 170ktpa non-EV demand for LCE, rising 10% pa.

Comparison of lithium demand forecasts to 2025

By way of a comparison to the above forecasts, Goldman Sachs sees LCE demand at 470ktpa in 2025 (amazingly this was based on only 3% BEV adoption by 2025, yet GS sees EV adoption to reach 25% (previously 22%) of 78m vehicles by 2025), and Deutsche Bank (NYSE:DB) sees it at 354ktpa in 2025. I expected major upgrades in the coming years from both GS and DB.

I recently noticed this issue (GS working off of only 3% BEVs by 2025) was also picked up by Barry Fitzgerald in his article "Big bet on lithium power', where he emphasized this seemed very low. I agree.

My forecast above sees 2025 LCE demand at 2,430ktpa for EVs and 2,830ktpa for all industries. Add to that energy storage, which I did not include here.

In any event, my forecasts of lithium demand by 2025 are around 6 to 8 fold higher than GS and DB. The main reason for this is I am working off of a 60kWh EV, and a much larger percentage (60%), and number (45m), of EV sales. If I have been overly optimistic regarding EV adoption, then I have been overly pessimistic with energy adoption, which I gave zero LCE demand in my table above. I did this on purpose to counteract any excess EV adoption optimism or bias, I may be showing. In reality, the wild card in LCE demand is how much LCE will the energy storage industry demand. This could also be a factor tipping lithium demand in excess of supply.

It may well be that the result falls somewhere in the middle, however for now, it looks to me like the GS and DB analysts are being very cautious regarding EV and energy storage adoption, and using a lower kWh EV (perhaps 20-30kWh as used in a hybrid). The industry with 12 mega-factories coming and many lithium mining projects coming, is not being so conservative.

LCE supply

I have started a table to see if the lithium miners can meet this extra demand, if in fact I am right.

Lithium Supply - miner by miner estimates (ktpa LCE)

Li Miners 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Albermarle (NYSE:ALB)/ Chengdu Tianqi 80 85 90 100 120 140 160 180 200 220
SQM (NYSE:SQM) 41 45 45 50 60 70 80 90 100 110


20 30 40 50 60 70 80 90 100 110

China/ Tibet

30 35 40 45 50 60 70 80 90 100
Orocobre (OTCPK:OROCF) 12 17.5 17.5 35 50 60 70 80 90 100

Galaxy (OTCPK:GALXF)/ General Mining

8 12 16 30 50 70 90 100 110 120

Neometals (OTC:RRSSF) /Mineral Resources /Gangfeng

20 30 35 40 50 60 70 80 90 100

Altura Mining (OTC:ALTAF)

16 32 35 40 50 50 50 50 50

Pilbara Minerals (ASX:PLS)

24 48 60 80 100 120 140 160

Nemaska Lithium (OTCQX:NMKEF)

30 35 40 45 50 55 60
Critical Elements (OTCQX:CRECF) 27 35 40 45 50 55 60

Lithium Americas (OTCQX:LACDF) (50% of Cauchari)

10 36 46 60 70 80 90
Lithium X (ROCEF) 15 30 40 50 60 70
Bacanora Minerals (OTC:BCRMF) 35 40 50 60 70 80
Juniors ? ? ? ? ?
TOTAL 211 270 339 500 696 856 1,010 1,150 1,290 1430
(Deficit)/ Surplus 0.5 2.5 12.3 30 42 (227) (506) (801) (1099) (1400)
Click to enlarge

NB: All figures above are in thousands of tonnes pa (ktpa)

The above table is a work in progress, and investors need to remember that the forward production numbers are guidance or estimates only.

The exercise does however highlight the following:

2016-2020 - Lithium demand can be met or exceeded with enough new projects coming online, especially in 2019-2020, assuming they come online according to plan.

2020-2025 - Lithium demand (with my earlier assumptions of accelerated EV adoption as Li-ion battery prices become very affordable from 2020 onwards) will likely exceed supply.

The most likely outcome here is that the juniors (currently around 50 globally) would have to be entering production in 2020 to 2025. The existing players could also hopefully be able to further ramp up production. However, some of them won't have production capacity as well as limits to their supply (life of mine will not support higher productions).

You can read my previous articles on "The lithium boom may have only just begun a 20 year bull run," "Top 5 lithium miners to consider," and "The junior lithium miners - high risk and high reward."


  • EV adoption may stall. Incentives can be removed. Battery prices may stop falling. All seem unlikely at this stage.
  • The usual risks when investing in mining stocks apply such as production risks.
  • Geo-political risk. Many of the lithium miners have projects in South America where politics can change quickly. Just ask Albermarle and SQM who operate the Salar de Atacama in Chile.
  • Lithium oversupply may occur. This will invariably happen from time to time, but this article has shown that the opposite is looking more likely. Demand could outstrip supply, especially should EV adoption rapidly accelerate, or energy storage take off in bigger volumes.
  • Lithium replaced by other chemistries. Unlikely, as no other technology is as compelling as lithium. Plus, lithium itself is only 2-5% of the cost of manufacturing lithium batteries. You can view the battery cost breakup here.
  • Shortages in other battery materials such as cobalt and graphite may cause problems with battery production.
  • Liquidity risk. Best to buy the lithium miners on their home exchanges.


The investment banks are taking a very cautious approach (Goldman Sachs estimating just 3% BEVs by 2025), with their estimates of EV adoption (compared to mine at 60% BEVs), are not really counting energy storage adoption, and hence their lithium demand forecasts are way too conservative, in my view.

I have chosen a less cautious approach, to just see what will happen if EVs really take off quickly in the early 2020s. My analysis plots EV adoption to steadily increase, then accelerate in 2020-2025, reaching 60% by 2025. I also assume that battery EVs with 60kwh battery packs will become the mainstream of EVs, and customers will upgrade from the smaller 25kWh hybrids to more powerful 60kW Battery Electric Vehicles as they become cheaper.

Tesla (NASDAQ:TSLA) Model 3, Byd (OTCPK:BYDDF) model e6, and the General Motors Chevrolet Bolt will be big early sellers in this market. Added to this will be ebuses, ebikes, and soon etrucks. To keep myself grounded, I have not added any LCE demand from energy storage, despite the fact that can also be huge, as we are still in the early days here. Perhaps at a later date, I will add this in.

If my above assumptions are on track, then expect the following:

1) The lithium market could well go into shortage, momentarily between now and 2020, but more severely from 2021 to 2025. This happened in early 2016, and we saw LCE prices in China triple within a matter of months. The major lithium miners were not able to respond quickly to this, due to production restraints and some political problems in Chile. We could see a re-run of this in 2021-2025, and periodically in between.

2) The existing lithium miners in production (see table above) will be looking at strong pricing, strongly rising production and sales, and booming profits. In fact, it could be a golden era for the lithium miners.

3) The up and coming juniors that make it to production may also prosper.

Off course, the lowest cost producers will be able to endure any pricing downturns, and are the safest plays. If we get strong demand and pricing as I expect, the quick to market spodumene plays can do very well also.

You can read more here on the demand/supply outlook for lithium, cobalt, and graphite.

Investors should be aware this is an exercise involving plenty of speculation as to future events. With this in mind, you should do your own modeling based on figures you are comfortable with.

Being a work in progress, if you see any errors on production numbers feel free to let me know.

As usual, any comments are welcome.


I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advise.

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