The lithium market, after experiencing significant volatility with prices peaking during the electric vehicle (EV) boom and then falling due to oversupply, is now on the brink of a potential resurgence by 2025. This shift is expected to bring both challenges and opportunities for businesses within the lithium sector. Lithium, essential for EV batteries and energy storage systems, saw its prices soar between 2021 and 2022 as global demand for EVs surged. However, the rapid expansion of production, especially in China, led to an oversupply, causing lithium prices to plummet by nearly 90% in some contracts.
Despite the current downturn, market analysts view this as a value-buying opportunity for long-term investors. The McKinsey Battery Insights team highlights several factors that could significantly increase lithium demand by 2025 and beyond. Key among these is the accelerating adoption of electric vehicles, fueled by government policies aimed at reducing carbon emissions, such as the U.S. Inflation Reduction Act and the EU's planned ban on internal combustion engine vehicles by 2035. McKinsey predicts that up to 90% of passenger vehicle sales in major markets like the U.S., Europe, and China could be electric by 2030.
Furthermore, the expansion of renewable energy storage solutions is expected to further boost lithium demand. As the world shifts towards solar and wind power, the need for efficient large-scale battery storage systems becomes paramount, with lithium-ion batteries currently leading the technology space. Technological advancements and supportive policies are also anticipated to drive demand, with projections indicating global demand for lithium-ion batteries could grow from 700 gigawatt-hours in 2022 to 4.7 terawatt-hours by 2030.
Long-term forecasts from Statista suggest global lithium demand could exceed 2.4 million metric tons of lithium carbonate equivalent by 2030, doubling from projected 2025 levels. This indicates the current price drop may be temporary, with supply potentially struggling to meet the surging demand over the next decade. Companies like Atlas Lithium (NASDAQ: ATLX) are positioning themselves to capitalize on this potential market recovery. Atlas Lithium is advancing a major hard-rock lithium project in Minas Gerais, Brazil, and is preparing to deploy its modular dense media separation (DMS) lithium processing plant, which emphasizes environmental sustainability and efficiency, aligning with the growing importance of ESG factors to investors.
