Lithium, the key ingredient in powering electric vehicles (EVs) and other essential technologies, has seen a rollercoaster ride in recent years. After experiencing a boom in demand, particularly between 2021 and 2022, lithium prices have taken a sharp dive due to oversupply. This has left many investors wondering if the market is entering a period of stagnation, or if it’s a window of opportunity for those with a long-term perspective.
The surge in demand was driven by the global shift towards greener solutions, with numerous companies focusing on EV production and battery storage. This led to record prices for lithium, but the rapid expansion of production, particularly in China, ultimately led to a glut in the market. As producers raced to meet anticipated demand, the price of lithium hydroxide, which reached a peak of $85,000 per metric ton in 2022, has now fallen to approximately $12,000 per metric ton. Similarly, lithium carbonate contracts, which were over $40,000 per metric ton last year, have dropped to around $13,000 per metric ton.
While this sharp decline has shaken market confidence, it could also present a unique value-buying opportunity. For investors willing to look beyond the short-term oversupply concerns, the current low prices could be an appealing entry point. So, the question remains: will demand rebound, and if so, how soon?
Several market experts believe that the demand for lithium is poised for a resurgence. The McKinsey Battery Insights team argues that the accelerating shift toward electric mobility and renewable energy solutions will drive a significant increase in demand. By 2025 and beyond, they predict that several key factors will play a crucial role:
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Electric Vehicle Adoption:
With governments worldwide pushing for aggressive policies to reduce carbon emissions, EVs are becoming central to these efforts. The U.S. Inflation Reduction Act, the EU’s ban on internal combustion engine vehicles by 2035, and China’s ambitious EV policies could drive a surge in EV sales. As more automakers transition to electric fleets, the demand for lithium-ion batteries, the heart of EVs, will soar. McKinsey predicts that by 2030, up to 90% of passenger vehicle sales in key markets like the U.S., Europe, and China could be electric.*
Energy Storage and Green Energy:
Beyond EVs, lithium’s role in renewable energy storage is also crucial. As solar and wind power generation increase, large-scale battery storage solutions become essential for storing and distributing energy. Lithium-ion batteries dominate this space, making lithium a key player in the transition to a cleaner energy future.*
Technological Advancements and Policy Support:
Battery technology improvements are expected to further fuel demand growth. According to McKinsey’s Battery Insights team, global demand for lithium-ion batteries is projected to increase dramatically over the next decade, from 700 gigawatt-hours (GWh) in 2022 to a staggering 4.7 terawatt-hours (TWh) by 2030.*
Long-term Demand Projections:
Data from Statista anticipates that global demand for lithium will surpass 2.4 million metric tons of lithium carbonate equivalent by 2030, doubling from projected 2025 levels. This surge suggests that the current price drop is likely temporary, with supply needing to catch up as demand potentially booms over the next decade.Atlas Lithium: A Potential Play on the Lithium Rebound
In this evolving landscape, Atlas Lithium, a Brazilian company, could be a company to watch for those seeking exposure to the potential increase in lithium value. Atlas Lithium is advancing its hard-rock lithium project in Minas Gerais, one of the largest lithium exploration projects in Brazil. Their strategic advantage lies not only in their sizable resource base but also in their efficient technological approach to lithium processing. They are preparing to ship their fabricated modular dense media separation (DMS) lithium processing plant from South Africa to Brazil. This technology is designed to separate lithium-bearing spodumene from other materials, providing a high-grade lithium concentrate essential for battery production.
Atlas Lithium argues that their DMS plant represents a significant step for Brazil’s lithium industry with its modular design allowing for efficient transportation and installation. Phase 1 of the project aims to produce up to 150,000 tonnes per annum (tpa) of 5.5%-6% battery-grade spodumene.
Atlas Lithium’s Position in the Global Supply Chain
Atlas Lithium emphasizes that the DMS technology they utilize significantly reduces water consumption compared to traditional lithium processing methods, making it an environmentally sustainable way to produce high-quality lithium. As ESG (Environmental, Social, and Governance) factors become increasingly important to investors, Atlas Lithium believes their sustainable practices enhance their appeal. They believe their recent progress in advancing their Brazilian operations marks a pivotal moment. The upcoming shipment of their processing plant to Brazil, packed into over 100 containers, is a testament to the logistical and operational progress that could allow Atlas to capitalize quickly on a potential new wave of lithium demand.
