The Charge of the Lithium – A Trillion Dollar Market

What just happened?

Toyota plans to spend $13.5 billion on battery development by 2030. The goal is to reduce the cost of car batteries by 50% compared to Toyota bZ4X, an electric crossover that the automaker plans to release said CTO Masahiko Maeda in a speech to the media and investors. He added that this will reduce the battery capacity, which in itself can reduce vehicle costs by 30%. (1)

What does this mean?

The global battery capacity is currently 455 GWh and the average lithium-ion battery plant produces 7.9 GWh3. Battery manufacturers have already planned massive increases in capacity over the next decade, with production estimated at 2,450 GWh by 2029, enough to supply. about 49 million electric vehicles per year4. Looking ahead, 49 million vehicles represent over 65% of total global vehicle sales in 2019. A Tesla lithium-ion battery can add the equivalent of 1 terawatt hour (TWh) or 1,000 gigawatt hours (GWh) to the total battery power. It is estimated that the production of batteries for one million electric vehicles will require about 600,000 tons of zinc. (2)

Technical details aside……

At present, Australia, Chile, Argentina, Bolivia, China, Brazil, Zimbabwe and Portugal have large-scale industrial enterprises producing lithium raw materials on a large scale, although this number is expected to increase as lithium production increases to meet demand. The surge in demand for consumer electronics and electric vehicles has pushed up the price of lithium and prompted many investors to consider new sources of metal, including mining from geothermal water in Germany and the United Kingdom. Since the Covid-19 pandemic, the work-at-home revolution and green economy recovery in many countries have led to a sharp increase in the demand for portable electronic devices and electric vehicles (EV), which in turn has led to a sharp increase in the demand for lithium and metals to power their batteries. (3)

The high performance and reusability of lithium-ion batteries means they are the standard power source for most rechargeable electronic devices, but questions of cost, safety and sustainability have prompted scientists to look for breakthroughs with alternative materials. Battery manufacturers are struggling to secure the supply of key ingredients to these large power supplies, mainly cobalt and lithium. Battery and car manufacturers are relying on the mining sector to find new deposits of these precious minerals. Demand for other key battery components such as graphite and lithium carbonate also exceeds supply. (4)

How does this impact the legal sector?    

In 2015, global demand for lithium was 184,000 tonnes, with battery demand accounting for 40%. According to Transparency Market Research, the global lithium-ion battery market was $ 30 billion in 2015 and will grow to over $ 75 billion by 2024. Morgan Stanley analysts predict that global car sales will grow 50% by 2024. 2050 - over 130 million units. per year and it is estimated that electric vehicles will account for at least 47% of this total. The goals of reducing China's carbon emissions in the United States cannot be met without rechargeable lithium-ion batteries, which are used in electric vehicles. (5)

The electric vehicle revolution in the West will stall if the supply of critical battery cells such as lithium does not keep pace with the expected huge increase in demand. It is estimated that the value of lithium in the electric vehicle market will increase between 2022 and 2024. Whatever the metric is, the demand for lithium for electric vehicle batteries will continue to grow. Daniel Clarke, subject analyst at GlobalData, said China owns 80.5% of the world's lithium-ion battery capacity in 2020 and, even with the US and EU, top efforts will continue to dominate by 2026 with an expected share of 61.4%. (6)

Pricing and research firm Benchmark Mineral Intelligence estimates that lithium carbonate prices could increase the production costs of electric batteries, especially on mass market models, by 16% or more. Lithium carbonate, which is often used to make cheaper electric vehicles, is up 289% this year to about $ 24,000 a tonne, while lithium hydroxide, used in long-range engines, is up 192% to about $ 26,000 a tonne. according to Performance Trial. (7)

China is the largest consumer of lithium in the world due to the size of its industries in the production of batteries for electric vehicles, renewable energy systems and consumer electronics. The lithium sector is not only growing rapidly, it is also developing rapidly and will undergo key shifts between improved demand and fundamental prices in the coming years. But for EVs to successfully realize their full potential, the entire supply chain from lithium mining to battery and car manufacturing must be carefully calibrated and coordinated to meet the growing demand for EVs. (8)

Assessing Firms:

#Allen & Overy LLP #Ashurst #Clifford Chance LLP #CMS #Herbert Smith Freehills LLP #Linklaters LLP #Norton Rose Fulbright #Addleshaw Goddard #Akin Gump LLP #Baker McKenzie #Burges Salmon LLP #Dentons #DLA Piper #Ernst & Young LLP #Hogan Lovells International LLP #Milbank #Orrick, Herrington & Sutcliffe (UK) LLP

¹ https://www.greencarreports.com/news/1133499_toyota-ev-costs-by-half-10-percent-range-degradation-in-10-years and https://www.forbes.com/sites/neilwinton/2021/11/14/lithium-shortage-may-stall-electric-car-revolution-and-embed-chinas-lead-report/

² https://globalxetfs.co.jp/en/research/can-lithium-keep-up-with-the-ev-boom/ and https://www.theguardian.com/environment/2017/jul/29/electric-cars-battery-manufacturing-cobalt-mining

³ https://www.forbes.com/sites/neilwinton/2021/11/14/lithium-shortage-may-stall-electric-car-revolution-and-embed-chinas-lead-report/ and https://www.investmentmonitor.ai/business-activities/extractive-industries/lithium-price-demand-environment-supply

⁴ https://www.theguardian.com/environment/2017/jul/29/electric-cars-battery-manufacturing-cobalt-mining and https://money.yahoo.com/battery-design-breakthrough-could-electric-160153135.html

⁵ https://www.reuters.com/business/autos-transportation/surge-electric-vehicle-sales-power-lithium-prices-shortages-loom-2021-09-13/ and https://www.theguardian.com/environment/2017/jul/29/electric-cars-battery-manufacturing-cobalt-mining

⁶ https://www.forbes.com/sites/neilwinton/2021/11/14/lithium-shortage-may-stall-electric-car-revolution-and-embed-chinas-lead-report/ and https://www.investmentmonitor.ai/business-activities/extractive-industries/lithium-price-demand-environment-supply

⁷ https://climatechangedispatch.com/rising-lithium-prices-risk-pushing-ev-dreams-off-the-road/

⁸ https://globalxetfs.co.jp/en/research/can-lithium-keep-up-with-the-ev-boom/ and https://www.investmentmonitor.ai/business-activities/extractive-industries/lithium-price-demand-environment-supply