A few years ago, Albemarle (NYSE:ALB) drew up a forecast of global lithium demand growth from 2015 to 2025. The internal analysis from the world’s leading lithium producer estimated the world would need 400,000 metric tons of lithium carbonate equivalent (LCE) by 2025, which marked a healthy growth rate from the 175,000 metric tons of LCE consumed the year the projection was made. Some analysts were skeptical. Some even called the company crazy.
Today, just four short years later, the only thing that’s crazy is the error bar on the 2015 projection. Albemarle now expects global lithium demand to soar to as much as 1.2 million metric tons of LCE by 2025 — three times its original estimate.
The company’s latest estimate is driven by expectations for swift adoption of electric vehicles (EVs) by major automakers and an evolving landscape for energy-storage technology. Investors will be pleased to know that the lithium producer is already well on its way to meeting future market demands.
Should investors trust these growth estimates?
The defense of Albemarle’s incredible forecast is that it has the inside track on market data — in more ways than one.
The question facing global markets isn’t whether or not the planet contains enough lithium to meet demand, but whether or not new sources of supply can be ramped up in time. Humans simply haven’t needed much lithium to date, although the emergence of EVs will change that virtually overnight. Albemarle estimates that the annual lithium supply required for transportation applications will rise from just 95,000 metric tons of LCE in 2018 to over 710,000 metric tons by 2025.
The business can confidently arrive at that number because of shifting market dynamics. Automakers desperately need to lock down lithium supply before making investment decisions on massive battery factories, but that supply doesn’t exist today. The result: Higher-volume, longer-term supply agreements are increasingly common, to incentivize producers to expand.
Case in point: Albemarle has secured purchase commitments for over 140,000 metric tons of its LCE production in 2025 — over half of which isn’t even on line yet. Equally important, the cozier relationships with customers gives the world’s leading lithium producer deeper insight into the evolving lithium-ion battery landscape.
A road map for lithium-ion battery tech
Current energy storage technology is good enough for automakers to begin competing on high-end EVs. And next-generation technologies just over the horizon could make electric transportation the default option for all new passenger vehicles by 2030 (or sooner). Getting there will require two things: advances in materials science that enable commercially ready devices, and several times more lithium supplies. Albemarle is leveraging its insights from customers and from research and development to deliver both.
While the business is unlikely to entangle itself in all of the exotic and complex materials that go into a lithium-ion battery (such as cobalt or silicon nanowires), it’s already well positioned for next-generation technologies. Consider that:
- Next-generation lithium-ion batteries will require several times more lithium than today’s products, which don’t use very much lithium at all.
- Battery manufacturers are increasingly turning to lithium hydroxide, rather than lithium carbonate, as their preferred raw material. Albemarle expects to produce and market up to 265,000 metric tons of LCE in the form of lithium hydroxide by 2025. That would represent an estimated 80% of the global market.
- Albemarle owns patents on engineered materials that could be used in future devices, potentially creating a significant additional revenue stream.
Albemarle recently laid out a road map for lithium-ion battery technology, which is expected to progress through two major steps in the next decade. Each new step will be ushered in by improvements to various components making up an energy storage device — and the changes are expected to arrive in the market much sooner than investors might expect:
|Metric or Component||Current Battery Technology||Advanced High-Density Battery||Next-Generation Battery|
|Market launch||Existing, global capacity to peak by 2023||Existing, dominant market share by 2022||Debut 2023, overtake current high-density market share by 2027|
|Cathode (positive side of battery)||High cobalt concentration||Greatly reduced cobalt concentration, higher nickel||Sulfur and air|
|Anode (negative side of battery)||Carbon (graphite)||Carbon (graphite) and silicates||Lithium metal|
|Separator (separates cathode and anode)||Polymer (Nafion)||Thinner polymer (Nafion) and ceramic coating||Solid state with optimized geometries|
|Electrolyte (surrounds separator)||Flammable liquid organic electrolytes||Safer liquid electrolytes||Solid electrolyte|
|Energy density||Baseline||20% to 40% greater||100% greater|
|Cost||Baseline||20% to 35% lower||50% lower|
In addition to building out what’s expected to be a commanding share of the world’s lithium hydroxide supply, Albemarle is developing engineered materials that could be used in — or even required by — next-generation batteries. It owns patents on lithium-sulfur separators and lithium metal foils, both of which are likely to play a role in solid-state battery designs.
Next-generation batteries are a huge opportunity for Albemarle
Investors can’t blindly believe every press release and presentation published by a company. Instead, they have to develop an analyst’s mindset to verify the information with quality external sources, although that can get tricky in technical domains such as energy storage and materials science.
That said, I think a deeper dive into Albemarle’s technology road map holds up to further scrutiny. The company is well positioned to deliver a steady supply of high-quality lithium materials to customers and perhaps even the engineered materials needed to create the holy grail of lithium-ion technology: solid-state batteries. It all points to an amazing future for the business and long-term shareholders.