Global lithium production in 2021 hit 546,000 tonnes, which is 24% higher than in 2020 (439,000 tonnes). Australia was the largest producer, followed by Chile, China and Argentina.

But even though Australia's Department of Industry, Science, Energy and Resources (DISER) said global output could reach 682,000 tonnes in 2022 and 1,034,000 tonnes in 2024, the total supply from mines is still insufficient to meet demand. New lithium projects, which are being developed to close the supply gap, will take time.

Nevertheless, Lithium production in Australia is projected to rise from 247,000 tonnes LCE in 2021 to 335,000 tonnes in 2022. It will also hit 387,000 tonnes in 2023 and 469,000 tonnes in 2024.

Elsewhere, expansions and new projects have been announced, such as Codelco, Chile's state-owned mining company, exploring at Salar de Maricunga. Drilling is due to be completed in early 2023.

In Canada, three new lithium projects in Quebec will start production in 2023, with a total production of more than 50,000 tonnes of LCE. The reopening of the Whabouchi mine, which is also in Quebec, is expected to increase production by 52,500 tonnes a year from 2025.

Mexico set up a state-owned lithium mining company after nationalizing lithium resources in April. The company plans to start operations within the next six months.

Europe and North America are also actively seeking to reduce their dependence on Chinese imports and develop their own lithium production.

This is why global demand for lithium will increase from 583,000 tonnes in 2021 to 724,000 tonnes in 2022. Demand is also forecast to grow by more than 40% over the next two years, pushing it to 1,058,000 tonnes by 2024.

But despite the expansion of new battery production capacity in Europe and the US, Asia remains the main source of lithium demand. Thus, shortages of lithium hydroxide and lithium carbonate continue to push spot prices to new records.

The price of lithium hydroxide is forecast to rise from $17,370 per tonne in 2021 to $38,575 per tonne in 2022. Then, it will peak in 2023 at over $50,000 per tonne, followed by a fall to an average level of around $37,600 in 2024.

While production expansion is already underway in Australia and overseas, it takes a long time for lithium mines to ramp up. The possibility of delays in bringing large quantities of lithium into production means that there remain risks of continued supply shortages over the next few years, which could push prices to double by 2025.