Without significant new investment, supply deficits could emerge as early as 2028. 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 lithium market is heading into a supply crunch much sooner than many industry players expect” said Allan Pedersen, Research Director at Wood Mackenzie. “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.”
Wood Mackenzie models four energy transition pathways, with lithium demand in 2050 ranging from 5.6 Mt LCE under a delayed transition to 13.2 Mt LCE in a net zero scenario.
Under the Delayed Transition scenario, the market remains adequately supplied until 2037 before entering deficit.
Under the Country Pledges scenario, deficits emerge around 2029, requiring an additional 6.7 Mt LCE of supply by 2050 to meet projected demand.
Under the Net Zero scenario, deficits are expected to begin in 2028 and persist through mid-century. Additional supply of approximately 8.5 Mt LCE will be required by 2050.
Electric vehicles (EVs) remain the primary driver of demand growth, accounting for 72–80 percent of lithium consumption across scenarios. EV penetration reaches approximately 75 percent by 2040 under the Country Pledges scenario and 95 percent under the Net Zero scenario.
The report also noted that rechargeable batteries across all applications account for 96–98 percent of lithium consumption by mid-century.
“EVs remain the primary driver of lithium demand growth, but energy storage systems (ESS) are the sleeper story” added Rebecca Grant, Senior Research Analyst at Wood Mackenzie. “ESS demand grows at 6-7 percent annually in our forward scenarios as renewables dominate new power capacity and grids require flexibility at scale.”
Under the Country Pledges scenario, the supply gap reaches 6.7 Mt LCE by 2050. Under the Net Zero scenario, the gap widens to 8.5 Mt LCE. Recycling will contribute increasing volumes of supply but is unlikely to address near-term shortages. Recycled supply grows at 13–16% annually, with meaningful volumes emerging from the 2040s as electric vehicle batteries reach end-of-life.
By 2050, recycling contributes between 2.3 Mt and 2.7 Mt LCE under ambitious scenarios, noted Wood Mackenzie.
According to Wood Mackenzie, total investment requirements range from approximately $104 billion under a delayed transition scenario to $276 billion under a net zero scenario.
Investment requirements under different scenarios:
Delayed Transition: $104 billion
Base Case: $114 billion
Country Pledges: $236 billion
Net Zero: $276 billion
Investment is expected to peak between 2030 and 2034, driven by the need for new mining capacity, refining infrastructure and regional supply chains.
“This is a $100-275 billion investment 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.”
Across all scenarios, one conclusion is consistent: lithium is irreplaceable for the energy transition, and the industry faces structural supply challenges that require immediate action.
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