Lithium must stay above $10 per kg to drive capacity buildup, executive says

Lithium carbonate chemical prices must remain in excess of $10 per kg to stimulate the creation of new capacity to match the exponentially growing demand, Wei Xiong, vice president of China’s General Lithium, has said.

Wei was speaking during a lithium market webinar hosted by investment bank Morgan Stanley on Friday June 25.

“Demand [for lithium] is very solid,” he said, “but supply is flexible and more price-dependent. With different prices, we will have different levels of supply.”

Lithium is a key ingredient in batteries that power electric vehicles (EVs) and in energy storage systems (ESS), and demand for both uses was expected to grow significantly in the years ahead.

Fastmarkets most recently assessed the lithium carbonate, 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan and Korea, at $13.50-14.50 per kg on June 24, up by more than 107% from $6.00-7.50 per kg on December 31 last year.

Lithium prices to stay on uptrend
During his presentation, Wei said that the rise in Chinese domestic prices for lithium carbonate since October 2020 was expected to slow down, but room for a downward move was limited.

Prices for lithium hydroxide, however, will continue to show substantial growth.

“While the lithium market is likely to experience a lot of tightness in the years ahead,” Fastmarkets’ head of battery raw materials research, William Adams, said, “there is potential for a bout of oversupply in 2022 or 2023, depending on how long it takes new material to be qualified, if producers get their timing wrong. In the near term - meaning the rest of this year and next - producers will need to be careful about the timing of their restarts and the ramping-up of new and expanded capacity.

“At present,” he added, “there is idle capacity at Bald Hill, Ngungaju, Wodgina and Greenbushes [all in Western Australia] and North American Lithium [in Quebec, eastern Canada].

“Expansions are on the way by SQM and Albemarle [in Chile], Livent [in Argentina], the Pilgan plant [in Western Australia] and at various operations in China, and new capacity will start to ramp-up at Lithium Americas’ Cauchari-Olaroz project [also in Argentina] in 2022,” Adams said.

“As we saw in 2018-19, there is potential for a considerable amount of new supply to hit the market in a short space of time,” he added. “That could have a significant negative effect on prices.”

Spodumene price rally
During his presentation, Wei foresaw a shortage of spodumene from independent producers in 2021 and 2022, and expected the price to remain above $600 per dry metric tonne in the long term.

“The shortness in the spodumene market will be relieved by 2023 onward,” he added.

Fastmarkets’ latest price assessment for spodumene 6% Li2O min, cif China, narrowed upward by $10 per tonne to $650-720 per tonne on May 26, from $640-720 per tonne on April 28. The feedstock price has surged by 73.4% since the end of last year.

Spodumene is a feedstock material used in the production of lithium chemicals that go into EV batteries. Most of the spodumene mined in Western Australia is shipped to China, where it is converted in lithium chemicals.

Spodumene supply has been constrained in Western Australia since Altura Lithium’s Pilgangoora project was put on care and maintenance at the end of last year, with no ramp-up of output expected in the near term.

But earlier this month, its new owner, independent spodumene producer Pilbara Minerals, announced that it will begin a staged restart at the lithium project, now renamed Ngungaju, in the October-December quarter of this year.

Pilbara completed the acquisition of Altura in January, becoming 100% owner of the project and renaming it.

Pilbara hopes to achieve capacity for 180,000-200,000 dry metric tonnes (dmt) per year at Ngungaju by the middle of 2022. Once fully ramped up, combined capacity at the company’s Pilgangoora operations, which include the Pilgan plant, will increase to 560,000-580,000 dmt per year, it said.

Another project that is on hold is the Wodgina spodumene mine, which was put on care and maintenance when Albemarle entered into a joint venture agreement with Mineral Resources for its development in 2019, due to the unfavorable lithium prices at the time.

Despite ambitions in Europe and the United States to expand their own independent supply chains, Wei noted that China dominates the lithium-ion supply chain for the moment. The major challenge was the lack of technology and expertise, and Wei suggested that it would make economic sense for European and American interests to seek potential partners, perhaps in China, due to their experience in the field.

In 2017, when it became clear that the transition to a greener economy was a key priority for countries in and around Europe, the European Battery Alliance (EBA) was set up by the European Commission.

The intention was to create a globally competitive and sustainable battery value chain, to avoid technological dependence on competitors, and to capitalize on the growth and investment potential of batteries.

There are now 15 battery production plants under construction across Europe, and once they are completed they will be looking for lithium feedstock.

Sofia Okun in London contributed to this report.

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