Lithium demand will increase
Despite the current stumble, the trend seems to be on the upside. Just follow the money that is placed for the lithium production, accelerated by the beginning of the energy transition from fossil fuels to renewable energies. In 2020, world lithium production was 82,000 tons, 5% less than in 2019, according to a report by the United States Geological Survey.
Although production was mainly affected by the impact of the COVID-19 pandemic, during the second half of 2020, manufacturers began requesting this metal due to “strong demand” from the battery market, the scientific agency added.
Similarly, mining companies and other firms began to channel resources to explore or exploit the mineral. An example is the Ganfeng Lithium company, which participates in a project in Sonora. This Chinese firm invested 1.3 billion dollars in battery production last year, according to its annual report. The company is so big that it has clients the size of Tesla, for which it makes batteries for electric vehicles. Hence, it needs to launch projects to extract lithium.
The uses of lithium
Lithium is not only used in car batteries, it is also used in electronic devices, cell phones and other tools for medical use, which is why most analysts expect the price to continue to rise. “With the global battery market capitalization projected to reach $173 billion by 2026, up from $105 billion in 2021, this is a fast-growing and innovative market,” said Dani Brinker, chief portfolio officer at eToro trading platform investment.
With most countries in the world committed to reducing the use of fossil fuels, the trend does not seem to be able to be reversed as it was years ago. In this year alone, the firm S&P Global Market Intelligence estimated that production will be almost a third higher than that of 2021, reaching 636,000 tons of equivalent lithium carbonate.
Of course, the price of lithium, like any commodities or active, it is subject to ups and downs and uncertainty. Just now it has lost momentum after the Chinese government, which sticks to its zero-COVID strategy, in March imposed a new round of restrictions and closures that paralyzed economic activities in cities as important as Shanghai.
Car producers and consumers of lithium such as Tesla, Toyota, Volkswagen, among others, closed factories for several weeks between March and April, which weighed on the price of this metal.