How is lithium demand and supply looking in 2022 and beyond?

Lithium players have seen the metal’s prices jump in 2021. It is mainly used in the manufacture of electric vehicle (EV) batteries, drugs, ceramics and glassware.

The strong increase in demand for light metals was supported by a surge in demand for electric vehicles, as various countries encouraged the sale of electric vehicles.

Demand for lithium is also expected to remain firm in 2022 due to limited supply. The Resources and Energy Quarterly report estimates that spot prices for spodumene are expected to reach US $ 1,185 per tonne over the next year due to strong demand from manufacturers of electric vehicles.

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Lithium prices could be determined by various factors. Let us examine them briefly.

Gap between supply and demand

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The lithium market is also expected to remain tight next year. According to estimates from S&P Global Market Intelligence, demand for lithium is expected to be around 641,000 mt lithium carbonate equivalent (LCE) in 2022, while supply is expected to be 636,000 mt LCE, creating a shortfall of market of 5,000 mt LCE, significantly lower than the 2021 deficit of 8,000 mt LCE.

The wide gap between demand and supply could keep lithium prices firm for years to come.

Rise of EVs

A rapid increase in demand for electric vehicles, supported by a wide range of models, cheap operating costs, and government subsidies, has helped keep demand for lithium strong. In addition, the demand for electric vehicles is only expected to increase in the coming years.

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Growing demand for electric vehicles is forcing manufacturers of batteries and electric vehicles to secure long-term supplies of lithium.

Zero carbon race

As the world aggressively moves forward to meet the 2050 carbon neutrality goals, as part of the commitments made in the Paris Agreement, the demand for battery metals is expected to increase.

Zero net emissions

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Governments around the world are doing their best to strengthen their position in the lithium market. The European Commission added lithium to the list of critical raw materials for the first time in 2020. On top of that, a report released by the International Energy Agency (IEA) in May also recommended that governments start to store battery metals, as demand may increase in the years to come.

The return of Chile

Chile’s role in producing lithium will be an important factor to watch in 2022. The country lost the crown of the world’s largest lithium producer in 2018. Chile opened a tender in October 2021, inviting 57 companies to explore and produce 400,000 tonnes of lithium. . Chile’s current decision could put the country back in the game and help ease the supply.

China’s role

Although it has the fourth largest lithium reserve in the world, the country is unable to produce a substantial amount of lithium as most of the metals in the batteries are found in the salt lakes around Tibet and Qinghai, located on the Tibetan plateau at high altitude, making it difficult to refine and transport lithium.

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The adoption of new technologies to extract more resources could help the country to increase its production and in turn help the lithium supply to improve in 2022.

Final result

Demand for lithium is expected to increase in 2022, with electric vehicles gaining market share as part of the green push. However, various factors, including the supply to Chile and China, will play a key role in the fate of lithium prices in the years to come.