Battery shortage gloom and doom. Is lithium scarcity really our main concern?

The recent announcement of “The end of combustion engine car production” illustrates — again — that the future of the OEMs is electric! Battery-powered vehicles will be the next generation of passenger transport — like it or not, there is no way back. Going fully electric though has risen the concern around a potential battery shortage ahead. This affects not only the OEMs themselves, but the somewhat smaller manufacturers along the battery value chain, e.g.: the consumer goods, E-bike, or Power Tools sector. Plenty of fear-mongering statistics and articles are being released around lithium shortages driven by extreme demand and the likelihood of battery technologies becoming scarce.

Is Lithium really the problem? Like anything, there is some truth to it but also a lot of misinformation. There are many arguments to be made that lithium consumption and EV batteries are directly related and that there will be more resources needed to manage demand. However, we’re also seeing research around future battery technologies as they develop that may reduce some of that demand.

Let’s dive right into it — what is behind lithium’s scarcity, potential other threats, and reasons to be hopeful as we move towards a future with clean energy.

The current state of Lithium production

Before talking about scarcity, though, we first need to understand the current market and supply chain. As of now, Western Australia is responsible for supplying about 60% of the world’s lithium. The other 40% is provided by salt flats located in Argentina, Bolivia, and Chile.

There are current projections around a deficit of lithium supply developing and widening by 2030. Coupled with a projection that global demand will surge to more than five times the current levels — that makes it easier to understand the fears surrounding lithium scarcity.

However, a key aspect to note when we talk about the current state of lithium is that there are still underdeveloped resources that could bolster supply. While Western Australia may be a majority supplier, shoring up the remaining 40% of the supply and providing growth avenues could lead to a more balanced market with increased supplier options across different regions.

A looming threat

While the lithium shortage is still projected to be at least a decade away, there are threats on the horizon that could jeopardize demand. Because the issue isn’t necessarily with lithium itself — it’s also with the other components that are used to produce batteries. While rare metals may only account for 4% of the weight used in a typical lithium-ion cell, supply chain issues loom. Such metals, used for batteries, include besides lithium, nickel, and cobalt.

While graphite and nickel are still available and can meet surging demand, cobalt is a trickier one to navigate. Cobalt is a rare and expensive metal, and almost all of the global supply comes from one area: the Democratic Republic of Congo, where political unrest and labor exploitation are constant issues.

Research is currently underway to minimize or replace cobalt altogether in battery technology, but it’s a difficult one… Cobalt plays an essential role in battery life and performance, and other metal alternatives haven’t been able to compete as such. Although there is development underway, short-term solutions are lacking.

This is why it stands to reason that lithium may not be the biggest worry when it comes to managing demand. It’s about ensuring the rest of the supply chain for battery manufacturing can handle the volume, mainly since very few countries are in control of so much of the supply and could drive up pricing.

Reason for hope?

As we look to the future, the future of battery manufacturing may not be as bleak as we may think. With current mines ramping up production, and more mining projects projected to start, we may not head towards lithium scarcity. If resources are scaled and accelerated to match the demand coming, there is a lot to be hopeful for — but that’s a big if.

With significant mining capacity unused across many different regions, the growth may be more sustainable since supply chains will not be dependent on a few countries for demand.

Diversified supply chains will help keep costs down as well, ensuring that global manufacturing can continue to expand as needed.

While lithium may not be the fear, there are still other materials that go into a battery that is at risk. The worry around metals like cobalt and other materials can only be mitigated by increased research and development, otherwise, it may prove a challenge towards scalability.

The bottom line is, it’s too early to worry about lithium scarcity just yet — but it’s worth having a bit of panic over how the rest of the supply chain will be impacted through increased demand.

But, even if we have enough lithium, are we ready to manufacture around 4 TWh of expected Li-Ion battery demand by 2024? Current predictions by S&P Global foresee a production capacity of ~1.5 TWh by 2025.

Until we see how battery technology evolves and whether demand can match supply chain capabilities, it’s difficult to say what the future holds. One thing is clear though — it’s going to be a tough race, especially for the smaller players!