Australian downstream to thrive as lithium miners aim to meet 2050 EV demand

Australia stands to gain from increased downstream opportunities as lithium miners are expected to meet electric vehicle demand by 2050.

Over 2 billion EVs would be needed by 2050 to fully transition away from internal combustion engines, according to a Nov. 30 report from professional services firm KPMG. Only 15 million, or roughly 1%, of the 1.4 billion cars currently on the world's roads are electric, and nearly half of the current stock of EVs were sold in the last year.

Critical minerals production will need to rapidly accelerate to keep up with the pace of EV sales. It would take about a century to produce enough lithium to reach 2 billion EVs on the roads by 2050, based on current production of around 550,000 tonnes of lithium carbonate equivalent projected to hit 1 million tonnes by 2024, according to KPMG's report.

While this highlights the early-stage nature of the lithium industry, KPMG is optimistic that miners are up to the challenge.

KPMG estimates lithium production would need to grow 12% per year until 2050 to produce those 2 billion EVs. That pace of growth is "achievable, and with technological advancements, we might be able to do that earlier with alternative technologies that aim to become more commercially viable in the future," Nick Harridge, KPMG's national mining and metals leader for Australia, told a Nov. 29 media roundtable.

"Technology is moving faster than it's ever moved before, [and] it will continue to, which gives us some comfort that we can get there," Harridge said.

If lithium production continues to increase by 20% per year until 2030, the growth rate could slow to 7% per year thereafter to meet EV demand, KPMG's report said.

"[W]ith other producers coming online, the pace of growth in Australia could slow to this and the world would still be able to meet total demand for lithium," it said.

Tianqi Lithium Energy Australia's lithium hydroxide plant in Western Australia. Source: Tianqi Lithium Energy Australia Pty. Ltd.

Playing to Australia's strengths

Australia's government expects its industry to account for up to 10% of global lithium hydroxide refining capacity by 2024, increasing to about 20% by 2027.

Given the higher price for refined lithium and potential premiums for green products, the rise in Australian lithium refineries "should help support investment in lithium mining," to the point where KPMG expects Australia to "maintain a high share" of global mined lithium supply for decades.

While critical minerals producers are not yet seeing premiums for sustainably produced product, conversations with industry showed that original equipment manufacturers appreciate "the ability to differentiate yourself if you can consistently demonstrate carbon neutrality," Trevor Hart, KPMG's global mining leader, told reporters.

This encourages miners to record and recognize the environmental, social and governance factors around the sourcing of their product, which "should play to Australia's strength, on top of the endowment of minerals that we have in reserves," Hart said.

Australia will also be better positioned geopolitically as it is transitioning toward low-carbon, on-site lithium production and onshoring lithium refineries that are also increasingly being powered by renewable energy, Cle-Anne Gabriel, KPMG's decarbonization transformation leader for Australia, told the media briefing.

S&P Global Commodity Insights' Metals and Mining Research team sees the current lithium project pipeline as insufficient to meet a looming major deficit starting as early as 2024. However, "margins for converted lithium are expected to be roughly twice those of concentrate producers for 2022 and 2023," the analysts wrote in an Oct. 11 report.

"This gives investors some assurance that even if market conditions degrade, lithium converters will have more space to adjust their operations compared with concentrate producers," the Commodity Insights team said.

Green mining opportunity

Commodity Insights expects the strongest growth in lithium raw material supply from Australia, where production of lithium carbonate equivalent is set to jump 175% to 820,380 tonnes by 2030, from 298,300 tonnes in 2021. During the same period, Australia's share of global output is expected to shrink to 40% from 50%, as other countries with significant resources ramp up production.

Argentina's lithium output is expected to jump 657% to 239,110 tonnes by 2030 with Canada's output surging 1,460% from first production in 2023 to 140,440 tonnes in 2030, according to Commodity Insights analysts. They see global production growing at a compound annual growth rate of 14.5% to reach 2 Mt in 2030, from about 601,200 tonnes in 2021.

Commodity Insights expects the lithium carbonate price to trade above pre-2021 levels and stay above $40,000/t to 2026. "The resulting high producer margins will support the decarbonization investments in the lithium production process," senior analyst Alice Yu said in an email interview.

"Lithium producers are already making efforts, from reducing water usage in Chile" to hard-rock lithium miners such as Pilbara Minerals Ltd. installing renewable energy in Western Australia, Yu said.

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