Lithium Demand to Grow Fivefold by 2040

Driven largely by electric vehicles and energy storage, global lithium demand is projected to surge nearly fivefold by 2040, surpassing 500,000 tons of pure metal, as per the International Energy Agency (IEA). Battery technology expansion is the primary driver of this increase. Clean energy technologies are expected to represent roughly 90% of the overall growth in lithium demand, and this growth could accelerate further with a faster shift away from fossil fuels.

Projections suggest a possible lithium shortage by 2035, even with the swift advancement of lithium mining and processing. According to the International Energy Agency's scenario, considering current national climate pledges, demand could outstrip supply by 30–40%. This supply chain vulnerability is heightened under the more aggressive goal of achieving carbon neutrality by 2050, as lithium demand accelerates at an even greater rate.

According to the IEA, the market value of extracting and refining six essential minerals—copper, lithium, nickel, cobalt, graphite, and rare earth elements—is projected to increase by 150% by 2040. Production capacity distribution is geographically uneven: Latin America leads in mining, particularly copper and lithium, but China dominates processing. China handles up to 75% of lithium and cobalt processing, over 90% of graphite and rare earth element processing, and 44% of copper processing. Furthermore, Chinese firms control as much as 95% of the world's battery graphite and rare earth magnet production.

Critical mineral markets, as highlighted in the IEA report, experience significant price volatility. Notably, 75% of these minerals exhibit higher volatility than oil, and half surpass natural gas in this aspect. This considerable instability presents challenges for long-term planning and elevates investment risks, particularly for battery and automotive manufacturers.

Despite this, the lithium industry is witnessing a surge in investment. In 2024, lithium exploration expenditures surpassed $1 billion, marking a historic milestone. Furthermore, investment in new mining ventures has jumped by 50% compared to the preceding five years. Nonetheless, the expansion of new production capacity is hindered by stringent environmental standards and substantial capital outlays.

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