Demand for battery raw materials is expected to increase dramatically over 2040, following the exponential growth of electric vehicles (EV) and, to a minor degree, energy storage system (ESS) applications. This increase in demand causes significant challenges across the entire supply chain, from raw material extraction to battery production.

Escalating Demand for Raw Materials

By 2040, the demand for key battery materials is expected to increase dramatically:

Supply and Potential Shortages

The supply of each processed raw material and components for batteries is currently controlled by an oligopoly industry, which is highly concentrated in China. Although China is expected to continue holding a dominant position, geographic diversification will increase on the supply side, mostly for refined lithium. However, the supply concentration globally is projected to remain extremely high for graphite and significant for mined cobalt, battery-grade nickel and manganese.

Deficits in the short term are expected for lithium in 2022-2023. Shortages are also probable for graphite, manganese and nickel supply as the global market balance will remain very tight between now and 2024 for graphite, until 2025 for manganese and up to the end of the decade for nickel.

Demand will outstrip supply for all raw materials beyond 2029-2030 (with the exception of graphite due to massive expansion of synthetic graphite capacity in China) unless new investments timely provide the supply required by the rapid growth of demand.

The lithium and nickel market balances for battery-grade products raise concern for raw material availability in 2030-2040, due to lithium’s explosive demand growth and nickel’s slower development on the supply side.

EU Production and Diversification

Total battery consumption in the EU will almost reach 400 GWh in 2025 (and 4 times more in 2040), driven by use in e-mobility (about 60% of the total capacity in 2025, and 80% in 2040).

The EU is expected to expand its production base for battery raw materials and components over 2022-2030, and improve its current position and global share. However, dependencies and bottlenecks in the supply chain will remain creating vulnerabilities.

The EU will continue to be dependent on imports of cobalt and nickel (concentrates and intermediates) for conversion in its refineries. Conversely, most inputs for producing refined lithium compounds will originate from the development of new lithium mines in the EU.

The refining of natural graphite for anodes will rely on both domestic production and imports. Concerning manganese, the EU is likely to be self-sufficient in both primary and refined raw materials.

The structure of global supply in the coming years (Figure 3) provides an initial insight into potential EU import sources. Nevertheless, a deeper analysis is required to forecast quantitatively the export availability worldwide and reveal potential competition with other importing countries, after taking into account parameters such as captive production, long-term offtake agreements, intermediate products and ownership of producing companies.

Australia and Canada are the two countries with the greatest potential to provide additional and low-risk supply to the EU. Other producers that could reduce the EU’s supply risks substantially are Argentina and Chile for lithium chemicals, Mozambique and Tanzania for natural graphite and the USA for refined graphite. In Europe, Serbia is a likely source of lithium minerals for conversion to chemicals, and Norway a reliable source of flake and refined graphite.

The Role of Recycling in Supply Security

Demand of primary materials for batteries can be decreased as well as the criticality of raw materials supply through the adoption of various Circular Economy (CE) strategies, e.g. extending the lifespan of batteries (reuse, remanufacturing and second-use) and recycling (providing secondary materials). The Batteries Regulation, in particular, is likely to play an important role in the next decades due to new targets4 related to collection, recycled content and recycling efficiency. Figure 4 illustrates the potential contribution of recycling in recirculating secondary materials to the materials demand.

Key aspects to increase quantities/volumes of secondary raw materials, to maximize circularity and to increase environmental benefits in the EU include ‘design for circularity’, traceability of batteries along their value-chain, development of business cases related to CE strategies, maximisation of waste batteries collection and development of high-quality recycling technologies. To estimate and monitor the contribution of different CE strategies quantitatively, further modelling is needed, especially due to rapid technological evolution and the expected creation of new business cases related to such strategies.

Conclusion

The future growth in lithium-based battery demand presents both opportunities and challenges. Addressing supply chain vulnerabilities requires a varied, tailored approach, considering things like diversifying supply sources, bolstering domestic production, and investing in recycling. Through planning and collaboration, a sustainable battery supply chain can be established to meet future energy needs.

To find out more about the latest in gigafactory innovations, technology, construction and regulations in Europe, meet with solution providers and hear talks from industry leaders, attend the 3rd European Battery Gigafactory Summit: Advances in Planning, Engineering and Operations taking place in Berlin, Germany on May 14-15, 2025.

For more information, visit our website or email us at info@innovatrix.eu for the event agenda. Visit our LinkedIn to stay up to date on our latest speaker announcements and event news

Source:

European Commission