Lithium Hydroxide Emerges as Critical Material for Battery Technology
Growing Demand for Rechargeable Batteries
The use of rechargeable lithium-ion batteries has grown exponentially in recent years across a wide range of applications like consumer electronics, electric vehicles and energy storage systems. Portable electronics like smartphones, laptops and tablets depend heavily on lithium-ion battery technology. Meanwhile, the electric vehicle industry is witnessing a phase of rapid growth and many automakers are investing heavily in EVs. This rising demand is driven by factors like technological advancements, cost reductions, governmental policies and sustainability goals. All these applications require large quantities of LiOH which is a key material used in the manufacturing of cathodes for lithium-ion batteries.
Supply Chain Challenges
With demand projected to multiply further in coming years, there are concerns about sufficient availability of raw materials especially Lithium Hydroxide. Currently lithium is primarily extracted from brine and hard rock deposits after which it needs to be processed into LiOH or lithium carbonate. Australia and Chile account for over 75% of global lithium production from brine deposits. However, the open-pit mining and solar evaporation methods used have long lead times. Meanwhile, converting lithium into downstream chemicals like Lithium Hydroxide requires substantial capital investments, technical expertise and time. These factors are limiting the industry's ability to rapidly scale up and meet the explosive demand growth. Securing long term supply of raw materials from geopolitically stable sources is a major challenge for battery and auto makers.
Rising Prices and Tight Supply
With demand far outpacing increases in supply, the LiOH market has become increasingly tight over the past years. This imbalance has led to sharp price rises making lithium chemicals among the costliest materials for battery production. Average Lithium Hydroxide prices increased by over 300% between 2017 to 2021. In 2022 as well, prices have remained at elevated levels despite some recent declines from peaks. The crisis has compelled battery and EV manufacturers to closely review their supply chain strategies and enter into long term procurement contracts with lithium producers. It has also accelerated investment plans for building lithium chemical conversion facilities especially in consuming regions like China, Japan and Europe to avoid dependency on a limited number of suppliers.
New Projects and Expansions
To address the supply crunch, major lithium producers are accelerating approvals for large mining and chemical projects globally. Leading companies like Albemarle, SQM and Ganfeng have already detailed plans to multi-fold their lithium chemical capacities by end of this decade. In Australia, Tianqi Lithium’s Kwinana plant and Albemarle’s Kemerton facility expansions are expected to come online in 2023. North American players like Lithium Americas and Piedmont Lithium are developing mines and converters in huge greenfield projects costing billions of dollars. Chinese companies continue investing heavily abroad too through acquisitions and partnerships especially in Argentina and Chile to gain access to low-cost resources. Many new mining and conversion startups have also emerged with promising technologies like direct lithium extraction. However, the long timelines from exploration to production means the supply glut may not materialize before 2025.
LiOH Emerges as Critical Material for Battery Technology
Preferential Material for High Energy Density Cells
While both lithium carbonate and Lithium Hydroxide can serve as sources of lithium for battery production, hydroxide is increasingly becoming the preferred material. This is because it yields higher energy density in lithium-ion battery cathode chemistries like lithium nickel manganese cobalt oxide (NMC) that power electric vehicles. EV batteries require maximum storage capacity within constrained space limitations making energy density a key parameter. NMC811 and other advanced Li-ion cell compositions favored for next-gen EVs often utilize LiOH as a raw material due to 10-15% higher storage capabilities versus lithium carbonate. Asian battery giants like CATL and LG Energy dominating the EV supply chain also favor Lithium Hydroxide supply chain linkages. This factor is supporting stronger long term demand growth projections specifically for LiOH and its emerging primacy in high-performance batteries.
Strong Demand Outlook
Given the electrification megatrend unfolding across major economic sectors, lithium and its derivatives are poised for unprecedented demand growth in the decades ahead. Most forecasting agencies project lithium compound demand to grow at 15-25% CAGR through 2030 driven by expanding EV sales and energy storage requirements of intermittent renewable power. By 2030, lithium requirements are estimated to cross 1 million metric tons against 2019 consumption of around 300k tons. Many analysts believe this may be an underestimate as adoption could happen at a faster than expected pace. Lithium Hydroxide being integral to high energy density cells powering EVs and grid storage will be a key beneficiary. The need for hydroxide will outgrow carbonate demand making it one of the most strategic materials for future mobility and clean technology revolution with massive long term market potential.
In conclusion, LiOH has emerged as a critical raw material required by the battery industry to meet the huge and increasing needs of EVs, consumer devices and energy storage infrastructure. However, the supply of Lithium Hydroxide is struggling to match the exponential growth in demand creating tight market conditions. While new mining, conversion capacity expansions are ongoing, it will take time before availability improves. Given LiOH 's preferential use in high energy density battery applications, demand is projected to multiply substantially this decade. Long term market opportunities seems vast as electrification increasingly transforms energy and transportation sectors supported by technological innovation as well as policies promoting carbon neutral goals.
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