Due to the rapidly growing production of electric vehicles that use lithium-ion batters, lithium has come into rapid demand. While there is plenty of lithium in the planet, the main problem is that it isn’t being extracted and refined quickly enough to keep up with the rapidly growing demand for batteries. Australia is the world’s largest suppliers of lithium, with the lithium coming from the Brine mines. Many other western countries like China, Argentina, and Chile who mainly get there lithium from salt lakes are racing for production. A good way to understand it is that it takes at least five to seven years to build a lithium mine and western countries are trying hard to build mines fast due to need for production. Due to this the prices for lithium has increased, according to Australia’s department of industry. That say the total global production, measured as lithium carbonate equivalent, was forecast in December at 485,000 tonnes in 2021, growing to 615,000 tonnes in 2022 and 821,000 tonnes in 2023. The prices have have grown due to the demand from Chinese battery producers. 

Many industries are facing a shortage for battery grade lithium, and the production and refining it is much slower then many car industries would like. Much of the costs for Litium-ion batters have gone down to the creation of Tesla’s Gigafactory. It takes about 24 months to build a gigafactory, and since the production of lithium is low its disconnects. Automakers are announcing all these new battery plants, but at the same time, they should be announcing new lithium mines or new lithium-refining factories to help increase production times. The introduction to scale into the industry has made it much easier to make lithium-ion batteries cheaper to sell. Raw material costs have been low, but in the last year, raw material costs, especially lithium, are rising significantly. Lithium is the bigger one here, and at the same time as these battery costs keep dropping, raw materials costs keep rising. So lithium prices have gone up and…they’re now impacting battery cells.

A lithium shortage is called a “structural shortage” by commodity industries. That is when there’s not enough capacity in the industry to meet that demand that is asked of them. In 2021 supply got tight and then it has just fallen into shortage in the next few months that fallowed. The traditional automotive supply chain is built to serve battery plants, and they’re used to having everything available. But the difference now with the supply chain for electric vehicles, is that it’s being built from scratch and doesn’t exist at the scale they need it to, so they don’t think about the raw materials that are needed to build, and we call this the great EV raw material disconnect. With all the money in the world, you can build one in five years.  Now the question is will lithium production increase in the coming years? Lithium-ion batteries, in general, they’re becoming cheaper due to the low production of them. Lithium-ion batteries are now probably three times better than they were in 2015.