Lithium Industry Needs $7 Billion a Year Investment to Meet EV Demand

The global lithium industry needs as much as $42 billion of investment to meet demand for the battery metal by the end of the decade as attempts to create supply chains outside China are subject to much higher costs.

The lithium industry will need $7 billion of investment each year until 2028. If achieved, it will help the sector meet forecast demand of 2.4 million tons a year by 2030. The demand forecast is four times higher than the estimated production of 600,000 tons in 2022.

The forecast is based on Europe and North America’s aims to build their own lithium supply chain in order to reduce dependency on China. That target could require twice as much capital than continuing to get the refined product from China.

China has been dominating the lithium supply chain, bolstered by economic clustering, a high level of expertise, and lower labor and energy costs.

The Biden administration has been pushing to accelerate domestic production of key battery materials including lithium, granting more than $3 billion to help process elements. Canada also prepares to provide up to C$3.8 billion ($2.9 billion) in this year’s budget to build a domestic critical metals supply chain.

Lithium prices has surged more than 400% in China over the past year as the battery metal struggles to keep pace with the booming electric vehicle (EV) demand. Tesla chief executive Musk has said there needs to be more investment in lithium mining and added that the company was considering mining or refining the product directly after prices rose to unprecedented levels.

Following raw materials coming short of EV demand and limiting production, EV makers could be involved in mining if they want to scale up EV output. While lithium’s major producers have large investments planned, those alone will not be sufficient and new mines are needed.

Under these circumstances, automakers could step in. They not just look for a return from profits generated by lithium, but they also look to secure supplies for their business.

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