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A new report has found that up to US$276 billion in new investment may be needed to meet a looming surge in lithium demand, with leading global resource sector research and consultancy group Wood Mackenzie’s latest “Energy Transition Outlook for Lithium” report estimating that demand for the critical metal could exceed some 13 million tonnes by CY50 as the energy transition accelerates.
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However, Wood Mackenzie research director Allan Pedersen says the lithium market may be heading into a supply crunch much sooner than many industry players expect.
“Under ambitious climate scenarios, we see deficits emerging from 2028. The industry needs to act now, should governments progress policies towards net zero. Projects approved today will determine market balance in the critical 2030s,” the WoodMac research director explained in early March.
WoodMac has modelled four energy transition pathways, with lithium demand in CY50 ranging from 5.6 million tonnes lithium carbonate equivalent under a delayed transition to 13.2 Mt LCE in a net zero scenario.
“Even under the Wood Mackenzie’s base case scenario, existing supply projects are unlikely to meet demand beyond the mid-2030s, highlighting the need for sustained investment across the value chain,” the new report noted.
Wood Mackenzie’s March report estimated new investment will peak between CY30 and CY34, driven by the need for new mining capacity, refining infrastructure and regional supply chains.
“This is a US$100 to US$275B story depending on how the energy transition unfolds,” Ms Grant said. “The winners will be those who can deploy capital efficiently while navigating trade fragmentation and securing regional market access.”
Australia could well be amongst the major winners with the latest government data suggesting the nation ranks second globally in lithium reserves and will remain a top lithium supplier in CY27 and beyond.
The nation was responsible for 36% of world extraction in CY24 and will produce nine percent of total global lithium hydroxide by CY27.
The Australian Department of Industry, Science and Resources’ latest quarterly found that while a delay in new mine commissioning is slowing the growth of global lithium extraction, Australia’s annual growth in mined output has still been revised up due to an improved outlook for local mine production.
Local mine output growth was tipped to rise by two percentage points – from around 7.1% a year to 9.1% a year between CY24 and CY27 due to a faster-than-expected mine production ramp-up. The growth of Australia’s lithium hydroxide production is also expected to continue.
The forecast export values of Australian lithium have increased by $0.7 billion to $6.3 billion in CY25–26 and by $0.9 billion to $6.8 billion in CY26–27.
Leading ASX-listed lithium miners include PLS Group (ASX:PLS), which was formerly known as Pilbara Minerals, as well as Mineral Resources (ASX:MIN), IGO Limited (ASX:IGO), and Liontown Limited (ASX:LTR).
Lithium is a key component in rechargeable batteries and EVs; however, the critical metal has had a roller coaster ride in recent years, fuelled by overproduction.
According to Wood Mackenzie, EVs are still the leading driver of demand growth, accounting for 72 to 80% of lithium consumption across scenarios. EV penetration is forecast to reach approximately 75% by CY40 under the country pledges scenario and 95% under the net zero scenario.
“EVs remain the primary driver of lithium demand growth, but energy storage systems are the sleeper story,” said Rebecca Grant, a senior research analyst at WoodMac.
“ESS demand grows at six to seven percent annually in our forward scenarios as renewables dominate new power capacity and grids require flexibility at scale.”
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