Lithium's Potential Problems with Grand Supply Plans Could Prove Dangerous

China: Electric Vehicle makers pray for relief from Lithium supply surge, but bulls fear more Pain if hurdles aren't overcome. With Lithium demand soaring due to the booming global EV market, many forecasters have been taken aback. Prices have skyrocketed to $35 billion in 2022 up from $3 billion in 2020 and producers are struggling to keep up.

Some bearish watchers believe fast-growing supply will be the decisive factor in 2023, yet many skeptics remain wary of potential tightness should miners fail to launch their ambitious volumes of new supply. As if this weren't enough, these forecasts peg production increases of between 22%-42% in 2023 — a breakneck pace for any complex extractive industry.

EV Industry Reels as Lithium-Ion Battery Costs Skyrocket. The transition of the world's vehicle fleet to battery power is being threatened by a dramatic increase in costs for Lithium-ion batteries. Elon Musk has spoken out about this "insane" jump in prices, echoing Tesla's struggles with sourcing raw materials at an affordable price. How this situation is resolved could determine how quickly the EV revolution continues.

Prospects of Lithium boom confront challenges for new producers. There is a broad consensus that Lithium supply will surge in 2023 as a range of new projects and expansions come to fruition. However, the sharp pullback in China's EV subsidies has cooled demand which could create an unsustainable mismatch in the market, prompting lower prices.

Established producers may be able to keep up with this trend but concerns remain over the ability of less-established companies to provide adequate supply while overcoming various regulatory, technical, and commercial difficulties. Looking ahead, forecasting Lithium's status quo has become a highly contested activity due to its rapid expansion in both demand and supply.

Lithium prices receive momentary respite as veteran suppliers bolster market. While Lithium prices have dropped by 20% since their record high in November, buyers can expect even more relief if the veteran suppliers like Albemarle Corp. and Chile’s SQM are able to successfully contribute a third of the increasing supply over the next year.

However, the challenge may still remain for those just beginning to enter the market, especially in regards to unconventional sources like lepidolite that some specialists claim could be costly and environmentally damaging when converted into battery power in large volumes.

Suppliers and Automakers Face Challenges in Securing Costly Lithium Relief. The path to supply and affordable Lithium prices for vehicle manufacturers is laden with obstacles, particularly considering China's recission of electric vehicle credits.

Furthermore, the global pandemic and economic status quo are dampening expectations for the near future. Nevertheless, should the Chinese economy unexpectedly revitalize itself, as well as other countries avoiding a major recession, then a dramatic upswing may be in store.