Economics for Business: Lithium Supply and Demand in Australia Report

This report examines the economics of the lithium market in Australia, focusing on the interplay of supply and demand. The analysis begins with an overview of the increasing global demand for lithium, driven primarily by the growing electric vehicle market. It highlights the supply shortfall, the rapid expansion of mining operations in Australia to meet this demand, and the country's dominant position in the global lithium market. The report uses economic principles, including supply and demand curves, to explain price fluctuations and market dynamics. It also discusses the long-term outlook, potential challenges, and recommendations for Australia to maintain its competitive edge, including recycling initiatives and resource leasing models. The report concludes by emphasizing the importance of strategic planning to ensure sustainable supply and capitalize on the opportunities presented by the rising demand for lithium. The analysis includes references to various sources, including industry reports and economic publications.

Running Head: ECONOMICS FOR BUSINESS
Economics for Business
Name of the Student
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Table of Contents
Introduction......................................................................................................................................2
Article Summary..............................................................................................................................2
Economic analysis of the article......................................................................................................4
Supply short fall of lithium..........................................................................................................4
Long run situation in the mining industry...................................................................................5
Recommendation.............................................................................................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

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Introduction
Natural resources are the gift from nature. The natural resources are extracted and used
for various productive purposes. Australia has the blessing from nature with a huge storage of
mining resources. The paper discusses demand and supply condition of mineral resources
particularly for lithium in Australia. To combat pollution there nations across the world is now
focuses on using Electronic vehicles. This increases the demand for lithium used in the battery
and gives the opportunity of a price gain. There is initially a supply short fall and the producers
need to increase supply to maintain a balanced situation. The paper analyzes this issue
economically.
Article Summary
In the global market, the demand for lithium is scrambling leaving a path on the iron ore
of northern Australia. The work in mines are accelerating to fulfill the rising demand of battery
makers globally. Large planned projects are initiated to increases the supply of lithium and retain
the position of Australia one of the top suppliers of in the global market. This will help to
maintain the grip of Australia in the global market (www.bloomberg.com 2017). The biggest
mine is extended about 75 miles from the Hedland Port, which provides a gateway to the China’s
market.
The target of Pilbara Minerals Ltd is to start shipment in the second quarter of 2018 from
the Pilgangoora project and advances its working for potential expansion. Another company
Altura Mining Ltd has scheduled to boost their output. The Wodgina mine located nearly
Mineral Resource Ltd is known for its largest lithium deposits. The undertaken projects will
form an emerging cluster global production cluster as opined by Althura and Pilbara.

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The successful implementation of all the emerging projects makes the region world’s
largest production hub. The projected time for this to be happen is mid-2020
(www.miningreview.com 2017). The consumers outside the China have shown their interest in
recent weeks. These nations include South Korea and Europe. They are now exploring supply
deals.
Figure 1: Lithium Supply in some major regions of the world
(Source: www.bloomberg.com 2017)

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The production of electronic vehicles raises China’s demand for lithium and the energy storage
brings considerable price gains. It is projected that by 2040, almost fifty percent of all the new
cars and one third of the all the light fleet vehicles globally will be electronic.
In the long run the situation is expected to be changed. The other suppliers may emerge
in the world market but the position of Australia will remain dominant. In 2027, Australia is
forecasted to control about 37 percent of world supply beating Argentian that captures 18 percent
share. Australia is continuously stressing importance on the equity investment in mines
(www.ft.com 2017). Besides the role of Australia as manufacturer of battery sees progress in
terms of exporting high value lithium. One of biggest sport utility vehicles maker of China give
its consent to invest in Tawana Resources NL, the Australian developer.
Economic analysis of the article
Demand and supply are the two most fundamental concept of market economics.
Demand is the buyers’ willingness to buy while supply reflects the sellers’ decision of supplying
in the market. These two forces act to determine equilibrium price and output in the market
(Chenayah 2017). When there is any mismatch between the two forces, this affects the price.
Supply short fall of lithium
The world demand of lithium is increasing at a rapid pace. The high demand of lithium
limits the miners in the world. The sales of electric vehicles has risen fast. The drivers worldwide
experiences the electronic vehicles ramping up the road quickly (Martin et al. 2017). The supply
shortage from increasing demand raise the price.

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Figure 2: Increased demand and Price gain for lithium
(Source: As created by the Author)
The scenario can be described using simple demand supply tool. The initial demand
curve is DD and supply curve is SS. In response to high price demand curve shifts to D1D1. This
raises the prices from P* to P1. The increasing price attract the investors’ attention and they
invests willing to invest in the mining industry and boost supply.
Long run situation in the mining industry
The persistently rising demand attracts multiplier suppliers in the industry. However, the
dominant position of Australia remained with projected supply of 37 percent in 2027 (Maxwell
2014). This will keep Australia ahead of other nation. This is expected to stabilize prices in the

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long term (Friedman 2017). However, the new supply wave still lacks the demand. The
anticipated growth outlook of demand keeps the prices still at a high level. The lack of raw
materials creates the supply constraints in the lithium market. However, though forecasting is
made about a supply ease of lithium by 2020 bur in future the market may face again supply
shortage in the future because of the lack of additional capacity to support the market
(theconversation.com 2016).
Recommendation
Australia has the opportunity to take advantage of the rising global demand of lithium. To
supply lithium in line with the demand Australia is recommended to develop a system of
recycling and create models for to lease the resources. The third position of lithium in the
periodic table makes it an important element of battery for electric vehicles. Australia should go
for innovation to meet the demand. The government and business should made proper planning
for collecting and processing the waste stream. There are growing need for efficiently sorting the
system in order to isolate batteries and have a moderate risk for fire.
Conclusion
The paper discusses supply and demand condition of mineral resources in Australia. The
increasing use of electric vehicles raises the demand of lithium. Australia is one of biggest
supplier of lithium. The growing demand coming from China, South Korea and Europe. This
pushes price in the lithium market up. However, the supply is increasing from multiple sources
but still it lags behind the demand and this maintains a high price in the market. Australia should
use recycling system and employ model for leasing resources.

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References
Chenayah, S., 2017. Book Review-Fundamentals of Microeconomics. Institutions and
Economies, pp.149-150.
Friedman, L.S., 2017. The microeconomics of public policy analysis. Princeton University Press.
Ft.com. (2017). BHP positions itself at centre of electric-car battery market. [online] Available
at: https://www.ft.com/content/367149e8-7ca2-11e7-ab01-a13271d1ee9c [Accessed 25 Nov.
2017].
Martin, G., Rentsch, L., Hoeck, M. and Bertau, M., 2017. Lithium market research–global
supply, future demand and price development. Energy Storage Materials, 6, pp.171-179.
Maxwell, P., 2014. Analysing the lithium industry: Demand, supply, and emerging
developments. Mineral Economics, 26(3), pp.97-106.
Miningreview.com. (2017). Lithium supply shortfall caused by electric vehicle boom. [online]
Available at: https://www.miningreview.com/news/lithium-supply-shortfall-caused-electric-
vehicle-boom/ [Accessed 25 Nov. 2017].
Stringer, M. (2017). Australia's Got a Lock on Supply of the Metal Used in EV
Batteries. Bloomberg.com. Retrieved 25 November 2017, from
https://www.bloomberg.com/news/articles/2017-10-25/ground-zero-for-lithium-giving-australia-
lock-on-global-supply
The Conversation. (2016). Lithium: Australia needs to recycle and lease to be part of the boom.
[online] Available at: https://theconversation.com/lithium-australia-needs-to-recycle-and-lease-
to-be-part-of-the-boom-54037 [Accessed 25 Nov. 2017].