Bringing online new lithium supply remains a painful process:
Bringing new capacity on stream is not easy and it is still difficult to bring new lithium projects online due technical and weather-related issues, as well as lack of investment and know-how, according to William Adams, Metal Bulletin head of base metals & battery research.
It took 10 years to double global lithium supply, while demand is anticipated to double every five years in the next 10 years, SQM senior commercial vice president Daniel Jimenez added.
“Supply has historically been overestimated and the lithium industry has a poor track record of predicting demand and supply…when supply will meet demand is uncertain,” Jimenez said.
Furthermore, chemical volumes produced from lithium carbonate equivalent units exported from Australia are reaching the market in lower than expected volumes, Galaxy Resources’ managing director Anthony Tse said, anticipating a shortage of material in the years to come.
But DSO is still at the core of lithium supply question:
Direct shipping ore (DSO) of lithium remains core to the discussion about whether the lithium market will be oversupplied in the coming years. Difficulties converting DSO, stockpiling of material and contamination of some of the processing plants are the reasons why less material could make its way to the market, Galaxy’s Tse said.
Nonetheless, several other sources told Metal Bulletin that there is appetite in the Chinese market for the continuous purchasing of the DSO, due to the higher average lithium carbonate battery grade spot prices - at $ 22.68 per kg on Thursday 19 April.
Over 2 million tonnes of DSO have been shipped to China from Australia over the past year, so it is only a matter of time before we see if companies succeed in converting this material, delegates said.
Lithium prices will remain strong:
Lithium prices will consolidate close to the current price levels in the Chinese spot market over the course of the following year as a consequence of the tight supply of lithium compound, Jingwen Sun, lithium & cobalt analyst at Changjiang Securities said
Furthermore, high production costs – a consequence of feedstock (lithium spodumene – typically more expensive than material produced from brine) coming from Australia – will translate into a more robust and sustained higher lithium compound market price, Galaxy’s Tse added.
Lithium producers will respond to the strong lithium demand:
Lithium producers are primed to respond to strong demand for the raw material and can adjust their production to market needs.
Demand for lithium compounds is anticipated to grow up to 800,000 tonnes per year of lithium carbonate equivalent (LCE) within the next 10 years, according to SQM’s Jimenez. Other sources spoken to by Metal Bulletin suggested demand for lithium compounds could surpass that figure as early as 2025.
LFP ion batteries still the most popular, but NEV makers making the move to higher nickel content batteries:
Lithium iron phosphate (LFP) ion batteries remain the most popular type of cathodes used in batteries in China due to their stability and safety, but new energy vehicle (NEV) makers are looking to move into higher nickel content cathodes.
Chinese and South Korean battery manufacturers expect to see NEVs with nickel-cobalt-manganese (NCM) 811 battery cathodes before the end of the year. Higher energy density, lifespan and superior performance are at the core of the change, because NCM 622 and NCM 811 cathodes increase driving range and overall performance.
The cobalt sulfate market is ready to evolve:
The market for cobalt sulfate is becoming more mature, with extensive interest in considering the commodity as an investment material.
As a result, traders have emerged in the spot market, adding more liquidity.
“People are treating cobalt sulfate just like cobalt metal, as an investment product, and have conducted stockpiling, which was one of the drivers behind the previous price rise [from mid-January to early April],” one delegate said.
But high payables are limiting cobalt sulfate ramp-ups:
Even as the battery sector primes itself for the EV boom and the surge in demand for raw materials which that entails, cobalt sulfate producers are struggling with their margins.
High payables for cobalt hydroxide at around 90% of Metal Bulletin’s benchmark low-grade cobalt metal price are squeezing margins.
So much so, that sulfate producers are purposefully keeping their raw material inventories low, sources told Metal Bulletin on the sidelines of the conference. Cobalt metal prices are at their highest level since March 2008, and any downturn in prices could erode their margin completely should they be sitting on costly stocks.
The low-grade cobalt price stands at $43.55-44.45 per lb in-warehouse, as of Friday April 20.
“Demand from the battery sector is very strong, but refineries in China can’t increase their production very quickly,” a producer source said.
Crunch time for manganese project developers:
Purity matters, according to Marco Romero, president and CEO of Euro Manganese, and the time is fast approaching for developers to decide in which direction to take their projects.
“Nickel-manganese-cobalt batteries are the leading battery technology, and it turn we are seeing demand for manganese sulfate, and in particular, high-purity sulfate,” Romero said.
Euro Manganese expects to start shipping to its customers in 2021, but must make a decision to produce manganese metal, manganese sulfate, or both in parallel within the next year.
“We’ve seen others changing their plan mid-construction to change their specifications,” Romero added.
And opportunities to establish a European supply chain:
At present, 100% of Europe’s requirement for manganese is imported, but there are opportunities to reduce the European Union’s dependence on external sources.
“People say the European [battery] industry is far behind others [but] investments are being made in anticipation that people will want to see European supply chains. It’s a critical industry [for Europe] as the automotive industry is already spread across the continent,” Romero said.
“We are striving for high-purity manganese, to make sure we are there as a reliable supplier…the foundation for the European battery industry,” Romero added.
But amid the EV boom, aluminium could be the metal to lose out:
While copper demand looks set for dramatic growth as a result of a growing battery industry and its associated infrastructure, aluminium could lose its market share with the decline in internal combustion engines.
“Aluminium is already extensively used by the automotive industry. The single most aluminium intensive part of the car is the engine and engine ancillaries, and the switch to EVs effectively loses this,” according to David Wilson of Freepoint Commodities.
And in the event of a shortage, the market should be able to respond much more quickly, not least due to plentiful supplies of bauxite across the world and low smelter utilization rates: “the time lag is much, much shorter than it is for other commodities,” Wilson said.
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Here are 10 key takeaways from Metal Bulletin’s and Industrial Minerals’ first Battery Materials conference in Shanghai on April 18-19.