Li
OP-ED: Lithium’s next decade – from “white gold” to “everyday metal”
I recently wrote a column on Ukraine’s potential in the titanium value chain with an analysis on the current geopolitical situation and geographic concentration. My key message was to consider Ukraine’s strong legacy and expertise in the industry, Ukraine’s active role in the global supply chain in chloride process feedstock, Ukraine’s recent presence in titanium sponge manufacturing (Ukraine stopped producing titanium sponge in 2021) and overall high quality of the local resource base, when planning diversification options for Western titanium supply.
Today, in light of Ukraine’s push to rekindle its mining and processing industry and considering Ukraine’s ambitious plans to build a critical minerals sector while reanimating its geological exploration program, I would like to tackle a very important metal – lithium. As Ukraine will close the application window for its first ever Product Sharing Agreement in lithium on December 12 (the PSA tender for the “Dobra” site), it is vital to discuss the opportunities, the problematics, the key market factors and the geopolitical situation around this highly important metal.
Over the last five years, lithium has gone through a dramatic transformation. It moved from a niche commodity to an important “everyday” metal. We have managed to witness one full “boom – bust” cycle already, a number of countries have felt firsthand what disturbances and dangers geographic concentration of supply chains hold, EV manufacturers have discovered what “raw material risk” really means, and many governments and institutions are now actively writing industrial strategies around battery metals. The bankruptcy of Northvolt, the care and maintenance of production assets in Australia, the unfaltering dominance of Chinese value chains, and the rise of lithium brines in South America shaped today’s new reality.
The spectacular price spike of 2022 and the equally dramatic crash of 2023-2024 are now behind us. And right now, the more important question is: who will actually dominate lithium supply, processing and technology in the next decade and what will it spell for the global critical minerals and related sectors?
Three things are absolutely evident. Demand is structural and will increase twofold, threefold and even fourfold. Supply looks adequate on paper, but in reality, it will be constrained. Positions of power shift from geology and resource base domination to a complex mix of costs, politics and industrial capability.
All of this has serious and systemic implications for any new entrant into the market, Demand is not a story of “if”, but “how fast”
If you look at various forecasts and scenarios out there, you will see that the vast majority are well aligned. Depending on the source that you prefer (IEA, Fastmarkets, Benchmark Mineral Intelligence, BloombergNEF, Goldman Sachs, Morgan Stanley), we can expect global lithium demand in 2035 to be somewhere between 3.5 and 4 million tons of LCE, roughly three to four times current levels.
The driving factors are logical. Electric vehicles still dominate demand growth. On top of that we have a quiet but explosive rise of energy storage. The rise of AI, data centers and high-tech digital infrastructure significantly contribute to the growth of demand in grid-scale storage.
Yes, chemistry is evolving. LFP has already taken significant share from nickel-heavy cathodes; sodium-ion is entering the low-cost segment; solid-state may take a slice of premium EVs in the mid to late 2030s. Yet, there are no factors that would remove lithium from the picture. All the factors mentioned change the nuances like where and how much lithium is used per kilowatt-hour. The need for large volumes of reliable, reasonably priced supply is as relevant as ever.
In other words, nobody can deny that demand will grow significantly in the next 10 years.
Supply: plenty on paper, much tighter in reality
On paper, the global project pipeline looks incredibly impressive. If you add up every announced brine, hard-rock and clay project, plus DLE (direct lithium extraction) and oilfield brine concepts, you can easily get to nameplate capacity of over 3.5 million tons LCE by 2035.
In practice, it’s all very different.
It is important to understand that usually lithium projects fail, slow down or scale down for three key reasons:
Costs:
The last two years were a brutal reminder. When lithium prices collapsed from the $70,000-$80,000 per ton level of 2022 to around $10,000-15,000 per ton, the first casualties were high-cost operators. As global prices continued falling, operators who could not cope with an adequate cost curve and projects with “over the top” CAPEX went into total breakdown.
Permitting:
Lithium projects are facing similar challenges that copper and nickel projects faced before. Time becomes a major problem. The path from geological exploration to industrial operation with product in the market can take a decade.
Technology and execution risk:
Direct lithium extraction, clay leaching and complex hybrid flowsheets are highly promising but not plug-and-play. Moving from pilot to commercial scale without losing recovery or blowing out operating costs is quite a challenge.
As a result, on paper, the global market looks comfortably supplied, but in reality, availability in any given year is much tighter. This logic underpins the long-term forecasts of $15,000-$20,000 per ton LCE price, as regular shocks, shifts and supply constrain affect prices.
The anatomy of the cost curve
The lithium industry is governed by a very simple, very unforgiving factor: the cost curve.
If you analyze global production, you can formulate three separate groups by cost curve.
Tier-1 Cost Curve: structural winners (5,000-7,000 US Dollars per ton of LCE)
These are the best South American brines, the most efficient hard-rock operations, and a handful of DLE projects. These operators have strong margins even at $10,000-$12,000 per ton prices. Such operators cn survive almost any down-cycle. In time of crisis, these operators cut CAPEX and comfortably play “the waiting game.”
Tier-2 Cost Curve: competitive, but cyclical ($7,000-$10,000 per ton of LCE)
This is where a lot of decent hard-rock projects, as well as some clay and maturing DLE projects sit. At prices of $15,000-$20,000 per ton, these operators generate very respectable returns. At prices of $10,000-$12,000 per ton, business is manageable, as long as debt is well managed and production plants perform according to design.
Tier-3 and Tier-4 Cost Curves: marginal and speculative players ($10,000-$11,000 per ton of LCE)
High-cost lepidolite, complex clays, poorly located or power-hungry projects. These operations are effectively leveraged options on high prices. They switch on during price spikes, then shut down as soon as the market normalizes. They are the first casualties in any downturn and the last to get financing when sentiment is cautious.
So, why do prices overshoot and break expected long-term averages (into the $25,000 US per ton and higher range)?
As more expensive projects are needed to cover the demand during tight years or when extreme disruptions happen, the market will gravitate towards the right-hand side of the curve. It’s not because the world runs out of lithium, but because the needed supply comes from very expensive projects.
In practical terms, if long-term average prices settle in the $15,000-$20,000 per ton range, Tier-1 and Tier-2 projects will be perfectly positioned; Tier-3 will swing in and out of existence; Tier-4 will live mostly in investor presentations. For new countries and companies entering the market, the single most important question is: which tier do you want to live in?
The answer is simple: every country or economy that wants to enter the lithium industry must do everything in its powers to create competitive advantages and investment conditions for investors and operators to come in and develop projects in the Tier-1 and Tier-2 domains. At the same time, it falls to the operators and investors to implement sound business models, use good engineering and manage debt wisely.
China’s midstream
No discussion of lithium’s future can ignore China. Right now, Chinese companies refine roughly two thirds of global lithium chemicals and produce well over 70% of battery cells. Two Chinese giants – CATL and BYD dominate the EV and battery industries.
By 2035, three things are likely to come true:
- China’s share of refining physically located in China will likely decrease as new plants are built in Australia, Korea, the US, the EU and the Gulf.
- Chinese-controlled capacity, however, will remain enormous. Chinese capital, technology and equipment are already embedded in emerging refineries from Indonesia to Saudi Arabia.
- Beijing will continue to tolerate low margins and selective losses in parts of the value chain when this serves strategic goals—securing offtake, supporting national champions, or squeezing higher-cost competitors.
In the long-term, we can expect that China will slow down its subsidizing of everyone and everything in the value chain. Domestic regulators are already pushing back against “blind expansion.” Over time, we should expect a consolidation of capacity inside China: weaker, dirtier, high-cost plants shut or absorbed; larger, more efficient complexes strengthened. Something that we witnessed in the Chinese Rare-Earth industry.
For new entrants, that means two things. First, you are not competing against a single Chinese operator or against a single “Chinese price,” but against a portfolio of Chinese cost positions, from ultra-competitive Tier-1 capacity to fragile Tier-4 operations. Second, you must assume that in any serious downturn, China will move faster, closing capacity, cutting deals, redirecting flows, because the state, the banks and the companies are all part of one system.
Western governments need to understand this and that is why fostering home-grown industries, strengthening Western supply chains and integrating such players as Ukraine is vital to supply diversification and long-term de-risking. For Ukraine, it means, creating and implementing stable conditions for the development of Tier-2 projects.
Success for new entrants: the seven key factors
What does success look like for a new country or company trying to enter the lithium race?
1. Cost position (tight, proven flowsheets, good resource quality and mineralogy, effective technology, positioning in the right Tier, sound debt management, competitive price of key inputs)
2. A guaranteed route to market and effective logistics (long-erm offtake contracts, JVs with chemical operators, conversion capacity aligned with local policy and economy).
3. Fast and predictable permitting (time is everything, speed is a competitive advantage, moving from PFS to production ASAP is a vital success factor).
4. Governance and ESG as commercial assets.
5. Integration into a larger industrial or geopolitical bloc (here the US-Ukraine Reconstruction Investment Fund and other Western strategic investment initiatives will play a major role for Ukraine’s entry into critical minerals).
6. R&D support and integration into strategic alliances not only in terms of supply chains, but also in terms of technology sharing and joint R&D efforts (science and tech play major roles in critical minerals).
7. Development of human capital.
Barriers: why many will fail
We have to understand that many new entrants will not make it to 2035 as serious players. Such factors as capital constraints (don’t forget that lithium is cyclical), policy volatility, market volatility, and over-promising on unconventional technologies.
This also means that projects with good fundamentals like hard-rock spodumene will have their definitive segment for many years to come and Ukraine can leverage its hard-rock deposits, like the “Dobra” PSA, and the by-products (the rare metals involved) to gain market position, especially in the European market.
From being a resource holder to becoming strategic partner
The next decade will be under the “New Age of Electricity” flag and lithium, graphite, copper, nickel and uranium will all play leading roles. At the same time, strategic metals and materials like titanium, zirconium, hafnium, germanium, gallium. Ukraine is an ideal power-play in this light, especially in its proximity to Europe and its well-developed logistical network and infrastructure.
We must understand that lithium is not a simple resource story. It is about who can turn geology into strategic capability: well-positioned in the cost curve, reliable, technological lithium volumes that feed into trusted midstream and downstream hubs and industrial clusters.
For new countries, the choice is stark. Either they remain price-taking exporters of raw material, forever exposed to the shocks and swings of the market. Or they deliberately build the conditions, cost structure, governance, speed, and partnerships to become indispensable partners in a world that badly needs secure, sustainable lithium, critical minerals and other strategic metals and materials.
The resource base is very important, but in the next decade, those who can combine it with policy, speed, discipline and alliance integration will triumph.
Yegor Perelygin is Deputy Minister, Ministry of Economy, Environment and Agriculture of Ukraine
