Lithium is a chemical element present in trace amounts in all rocks and in the oceans given its solubility as an ion. It is also widespread in low-grade clay minerals. The lightest metal in the world, appetite for it has grown ravenously, as the era of technology demands long-lasting batteries to power tech innovations such as electric vehicles. But, will the steady demand be enough to keep prices high in the mid-term with operators now eager to increase supply?
The electric vehicles market expansion is one of the main factors placing lithium in the spotlight. According to the USGS Mineral commodity Summaries 2018 report, portable electronic devices, electric tools and grid storage applications are factors that contribute to this metal’s demand, not to mention lithium’s broad scope in medicine and pharmaceutics.
According to an analysis made by Statista, lithium demand has grown constantly in the last couple of years and is expected to keep this pattern in the mid-term. The statistics organization reports a total worldwide demand in 2018 of 252,653 metric tons of lithium carbonate equivalent (LCE), number forecasted to reach 300,000t/y by the end of 2021 and 422,600tn by 2015.
Lithium prices grew consistently with this demand after recovering from a stagnation toward the end of the first decade of the century. In 2011 the average price per metric ton of lithium was US$3,870 and by 2015 it had increased to US$6,500. Since then, lithium’s monetary value has almost tripled and is expected to reach the US$16,500 per ton in 2018. China remains king in the lithium market’s demand. But while electric cars have been the catalyst for the light metal’s demand, increasing supply could produce a dramatic price drop in the mid-term.
Continuous exploration has allowed an increase in lithium deposit findings worldwide by more than 53 million tons. According to USGS 2018, the main lithium powerhouse ranking has Argentina leading on resources, followed by Bolivia, Chile, China, the US, Australia, Canada, Congo, Russia, Serbia, the Czech Republic, Zimbabwe, Spain, Mali, Brazil, Mexico, Portugal and Austria.
Such is the lithium’s market boom, that securing its supply became top priority for technology companies around the world. “Strategic alliances and joint ventures among technology companies and exploration companies continued to be established to ensure a reliable, diversified supply of lithium for battery suppliers and vehicle manufacturers,” reports the USGS. For example, Sociedad Química y Minera (SQM), Chile’s leading producer, partnered with the Australian company Kidman Sources in striving to diversify supply with the Mt Holland project. This operation will be in the city of Perl and is expected to start producing by 2021 an estimate of 40,000t/y lithium carbonate equivalent. As for Mexico, although it did not take one of the top spots for lithium resources, the state of Sonora is regarded as holding one the largest lithium clay deposits in the world, being both scalable and high-grade.
USGS reported a 13 percent lithium production growth in 2017 compared to the previous year. The tight supply in Australian spodumene imports to China meant the Chinese spot lithium carbonate prices increased, ranging from US$15,000-24,000/t. Average fixed contracts in the rest of the world experienced lower prices due to a diversified supply. “For large fixed contracts, Industrial Minerals reported an annual average US lithium carbonate price of $13,900 per metric ton in 2017, a 61 percent increase from that of 2016,” says the USGS.
New lithium projects, such as Bacanora Minerals’ and the Mt Holland project, guarantee a healthy supply. But analysts at Morgan Stanley forecast that the demand boom of the last decade will be insufficient to keep prices steady, leading to a severe 45 percent price-drop by 2021. The estimated drop will be from the 2017’s average of US$13,375/t to $7,332/t.
But it is worth bearing in mind that lithium supply and demand should maintain a healthy balance, or it could follow the behavior of cobalt, especially given the number of substitutes lithium has. Out of a concern for the future prices and demand of cobalt, Tesla reduced the content of cobalt used in its batteries to the minimum and replaced it with nickel.
Should the stability of lithium prices be questioned in the future, other global battery producer giants may diversify away from it. However, lithium still remains the lightest element on earth and the easiest option for the battery market. Many multinational companies have secured off-take contracts for its supply and most likely it will stay in the limelight for some time.