Lithium Investments Surge Despite Price Drop, Anticipating Future Shortages
Lithium prices have declined sharply over the past two years due to slowing demand and oversupply, but the long-term outlook for the sector remains positive as forecasts predict a significant supply shortfall by 2030. The anticipated deficit is driving substantial investments aimed at scaling production capacity.
On December 12, 2024, Rio Tinto announced a $2.5 billion investment in a lithium mine in Argentina, which is expected to produce up to 60,000 tonnes of battery-grade lithium carbonate annually. This investment aligns with a broader trend of major spending in the lithium sector, despite the current market downturn.
In October, General Motors committed $625 million to develop the Thacker Pass project in the US, one of the country's largest lithium mines, in collaboration with Lithium Americas. Following that, Australian-based Sayona Mining and American firm Piedmont Lithium finalized a $623 million merger to consolidate their projects. Earlier, Rio Tinto had further strengthened its position with a $6.7 billion acquisition of Arcadium, making it the third-largest lithium supplier globally.
These investments occur against the backdrop of challenging market conditions, with lithium hydroxide prices having fallen nearly 90% since late 2022. However, mining companies are betting on a market turnaround. The International Energy Agency (IEA) has projected a gap of more than 150,000 tonnes between demand and supply by 2030, potentially driving prices upward.
Benchmark Mineral Intelligence analysts highlight that an additional $42 billion in investments will be needed by 2030 to meet the estimated demand of 2.4 million tonnes of lithium carbonate equivalent. This reinforces lithium's critical role in the energy transition, as it remains a key component for electric vehicles and battery storage solutions.
