S&P Global, top provider of market data gave forecasts that global demand for lithium and cobalt will increase at a compound annual growth rate (CAGR) of 26%. The mining forecast is anticipation of the expected global increase in the sale of passenger plug-in electric vehicles (PEVs).
Given that the forecast in PEV sales will increase from 2.9 million units recorded in 2020, to 9.5 million in 2025, the demand for lithium ion battery (LIB) production will raise the 455 gigawatt hour capacity (GWh) to 1447 GWh by 2025.
It is also expected that Europe and China will see the biggest increases in PEV sales, likely making them the strongest drivers in increased LIB capacity. Although China is currently the global leader in LIB capacity, having claimed 77% of the market share in 2020, S&P Global’s forecast is that Europe will achieve a 6% growth.
Moreover, diversification in other geographic locations will likewise see some countries become producers of LIB. That being the case, S&P lowered China’s forecast market share down to 65%.
However, product quality has been an issue, as they tend to vary among LIB manufacturers. While quality LIB producers were unable to expand production capabilities fast enough to meet the increased demand, the supply of quality LIB remains tight. On the other hand, there is excess inventory of low-quality LIB.
EU Policy Framework for PEV Sale will Boost EU LIB Capacity
Europe plans to increase 13-fold its LIB capacity by 2025, from its 2020 figure of 23 GWh to 368 GWh. As it is, EU member countries will be supported by a policy framework that aims to overtake China in LIB capacity.
The EU countries are set to further lower CO2 emissions as tightened policies aim to bring down CO2 levels by 15% in 2025, and subsequently, by 37.5% in 2025. As a result, European automakers have to make sure their respective regional PEV offerings conforms with the new emission policies. Otherwise, they will be penalized for selling PEV models that produce excess CO2 emissions, at a rate of 95 Euros for every excess gram.
Non-EU member countries like the UK and Norway, are instead offering purchase grants and lower road tax rates effective 2025, as well as poised to ban the sale of vehicles running on combustion engines by 2030.