Lithium Battery Supply Charges Ahead of Demand

---

Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--For many energy transition supply chains, the story is one of supply struggling to meet demand. For lithium-ion batteries used in electric vehicles (EVs) and utility storage, the opposite is true, according to a report released in January by Wood Mackenzie.

Entitled "Global lithium-ion battery supply and demand update H1 2023," the report's summary says, "Demand is growing for lithium-ion batteries to serve electric vehicles and stationary energy storage systems. However, thanks to aggressive manufacturing expansion in recent years, the global battery supply is expected to outstrip this demand for some years to come."

Wood Mackenzie sees supply growing by a whopping 45% in 2023, creating an excess of 1,380 gigawatt hours (GWh) because demand growth was expected to be much less. The consultancy said it expects that situation to continue for the next several years.

Good News for Buyers
In the free market, oversupply equals price drops, and that's definitely been the case for lithium. WoodMac said prices for lithium carbonate dropped by 50% in 2023. It expects the oversupply situation to extend at least into 2032, as continued supply increases remain significantly ahead of rising demand.

Bad News for Suppliers and Construction Crews
As would be expected, WoodMac's survey of 500 battery manufacturers showed that many of them are slowing the construction of new facilities by 50%. The remaining 50% still on schedule is still expected to be more than enough to outstrip demand through 2030. According to a summary of the report, "Should all projects move ahead, oversupply could exceed 2,400 GWh by 2032."

Asia Leads, But the West's Growth Is Electrifying
Asia Pacific nations currently account for 87% of the world's lithium battery resources, creating a surplus in that region alone of 558 GWh. This is likely to lead to yet more expansion cancellations.

It will come as no surprise that China leads that region, with battery export revenue up by 80% year-on-year in 2023's first quarter alone, according to the report. WoodMac said it expects China to control the supply chain for the next 10 years, as it exports more than 80% of LFP cathodes, electrolytes and separators.

Projects are continuing to move ahead in the U.S. and Europe. That growth, combined with cancellations in Asia Pacific, leads Wood Mac to predict that the West's percentage of the lithium battery market could reach 30% by 2032. Investment from the Inflation Reduction Act will help. Also, major oil producers and mining companies have only recently begun to harness significant lithium resources in Arkansas and elsewhere. As production rises in those areas, the U.S. alone may contribute significantly to further supply growth.

End Users: EVs and ESS
WoodMac sees battery demand more than doubling by 2032, with EVs accounting for 84% of that demand, compared to 79% today.

The other significant buyer of lithium ion would be stationary energy storage systems (ESS), mainly used as backups for renewables such as wind and solar, which is also looking to grow its capacity. The report sees storage capacity reaching 700 GWh by 2032, meeting all ESS demand. Here again, China will hoard market share at 89%. As China grows its own solar power systems, domestic demand along with long-term agreements abroad should ensure their dominance for the foreseeable future.

WoodMac adds, "The market share of lithium iron phosphate (LFP) batteries which are preferred in (the) China ESS market is supercharged, reaching 28% in 2023, and expected to surpass nickel-based batteries in 2030. Production of non-lithium-ion batteries is also scaling up, yet they will not exceed 3% of the market by 2032."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).