As the world enters a new phase of deglobalization, the lithium market faces both opportunities and challenges. Lithium, a key component in batteries, has seen demand surge in recent years amid the growing popularity of electric vehicles and renewable energy. However, geopolitical tensions and changing trade policies are disrupting lithium's global supply chain, creating uncertainty and risk for the industry.
In this article, we explore the current state of the lithium market and discuss the impact of deglobalization on the industry. We will also examine the potential opportunities and challenges facing businesses and investors in this new era.
1. The current state of the lithium market
Lithium is a soft, silvery-white metal that is ubiquitous in rocks and salt flats. It is used in a variety of applications including batteries, ceramics, glass and pharmaceuticals. However, the main driver of lithium demand in recent years has been the growth of the electric vehicle industry. In recent years, the battery field including ternary lithium battery, lifepo4 batteries, etc. has become the core driving force for the growth of lithium demand, and the significant expansion of the scale of new energy vehicles has pushed the price of lithium resources to continue to rise.
Since 2016, the global supply of lithium resources has been tight, and the price of lithium products has risen for a time. Beginning in 2018, lithium resource overcapacity caused the price of lithium products to fall. In 2020, due to the impact of the epidemic, the price of lithium products fell to a trough. Since the second half of 2020, governments of various countries have increased their emphasis on new energy technologies. The global new energy market has exploded, and the terminal demand for lithium resources continues to remain high.
According to a report by the International Energy Agency (IEA), the number of electric vehicles on the road in 2020 has surpassed 10 million despite the impact of the Covid-19 pandemic. That's a huge increase from just 17,000 electric cars in 2010. The report also predicts that the number of electric vehicles could reach 145 million by 2030, which will increase demand for lithium-ion batteries. Lithium demand is also being driven by growth in renewable energy. Lithium-ion batteries are used to store energy from the sun and wind, which helps smooth out fluctuations in supply and demand.
Demand for lithium is likely to increase as more countries set ambitious renewable energy targets. However, the global supply chain for lithium is currently dominated by several countries, including Australia, Chile and Argentina. These countries have the largest lithium reserves and export most of the metal to other countries. This poses a potential risk for the industry, as any disruption to the supply chain could lead to shortages and price spikes.
2. Deglobalization and the lithium market
Deglobalization refers to the process of reducing economic integration and interdependence among countries. The trend has been accelerated by the COVID-19 pandemic as countries try to reduce their reliance on suppliers from other countries and protect their own industries. The trend of de-globalization brings both opportunities and challenges to the lithium market. On the one hand, the development and expansion of domestic industries in countries such as the United States and Europe may increase demand for lithium.
These countries all have ambitions to develop their own electric vehicle and renewable energy industries, which could create new markets for lithium. On the other hand, changing trade policies and geopolitical tensions could disrupt the global supply chain for lithium. For example, the United States and Europe have imposed sanctions on China, the largest producer of lithium-ion batteries. This has led to a shortage of batteries, which in turn has affected the production of electric vehicles.
In addition, changes in consumer preferences may also affect lithium demand. With growing awareness of environmental issues, consumers are increasingly concerned about the social and environmental impact of the products they buy. This could lead to a shift to more sustainable and localized materials, reducing demand for lithium.
3. Opportunities and challenges for companies and investors
The deglobalization of the lithium market presents both opportunities and challenges for businesses and investors. On the one hand, a growing domestic industry in countries such as the US and Europe could create new markets for lithium. This could lead to the development of new supply chains and the emergence of new lithium market companies. Additionally, the global pandemic has disrupted supply chains and manufacturing processes, impacting the production and supply of lithium products.
At the same time, the deglobalization of the lithium market has also led to geopolitical tensions, trade barriers and regional supply chain disruptions, affecting lithium trade and investment. However, despite the challenges, the lithium market remains an important area for various industries including electric vehicles, renewable energy and consumer electronics. Rising interest in these applications and continuous investments in the lithium industry drive the growth of the market. In conclusion, the deglobalization of the lithium market presents both opportunities and challenges for the industry.
While the regionalization of markets has reduced dependence on a few countries, it has also created geopolitical tensions and supply chain disruptions. The shift towards a more environmentally friendly and sustainable future has increased the demand for lithium-based products, which is creating new opportunities for the market. As the market continues to evolve, it will be interesting to see how players in this industry adapt to changing dynamics and capitalize on new opportunities.
In recent years, the global supply and demand of lithium resources have grown rapidly. Australia, Chile, Argentina and China are the main supply ends in the world, and the four countries account for more than 95% of the world. China, Japan, and South Korea are the most important demand sides, and the three countries account for more than 70%. In recent years, lithium futures and auction pricing models have gradually emerged, which has had an impact on the traditional mainstream long-term agreement pricing model.
The new pricing model is superimposed with tight supply and demand, and continues to push up the price of lithium resources. China has become the world's largest consumer and trader of lithium resources, but the supply of lithium resources in China is insufficient, and its dependence on foreign countries is as high as 67%. The lithium resource market still has problems such as imperfect industrial chain structure, lagging behind in the construction of financial systems such as the futures market, and weak international competitiveness of enterprises.