Will Adams on the lithium price peak and what the future holds for the lithium supply/demand balance

Will Adams, head of battery and base metals research at Fastmarkets, talks to us about why he believes we may be seeing a peak in lithium prices, as well as why the market will still remain tight with any extra supply being quickly absorbed. He also shares how he believes the market needs to react to ensure there will be enough lithium supply to satisfy the ongoing demand.

Watch the full video interview, which was recorded in early August 2022, or read the key takeaways below.

Have lithium prices stopped rising? Have we seen a peak for now?

Yes, we have for the moment. The reason for the pull back is associated with the Covid-19 lockdowns in China. With factories closed, there have been stock production issues. There have also been parts shortages for semiconductors in Europe and the US. Constraints on production mean that there is currently not as much upward pressure on prices.

However, lithium supply is still very strong and waiting lists for electric vehicles (EVs) are currently anywhere from three months to two years, with the majority waiting six to 12 months, so there is a lot of pent-up demand.

Fastmarkets’ prediction is that once we see China coming out of lockdowns, the parts shortage should ease, and prices will start to pick up again. Although prices have pulled back and we have seen some ‘destocking’ as demand picks up, we’re inevitably going to see some ‘restocking’ which will put pressure on prices again. We are expecting that the peak will likely be at the end of this year or the beginning of 2023.

The outlook for the lithium market is polarized. Where does Fastmarkets stand and why?

We expect the market to remain tight. Extra supply is on the way, and we are seeing this already with expansions coming through with restarts of idle capacity. At the end of this year and the beginning of next year, we will see new production. This will alleviate tightness, but the market will still be tight and extra supply will be well absorbed by the market. There is strong demand out there and restocking is expected. As the downstream supply chain is growing so fast, we need to build up working stock too. Given the price rises predicted, we will likely see some strategic buying.

Those who are seeing an oversupply situation might be looking at supply and demand numbers and taking them at face value but supply rarely comes on smoothly and often there will be ‘ramp-up’ issues. It is also difficult to get the right grades to start with. All new materials also need to be qualified and this can take six to 18 months. New supply is on the way, it can take time to reach the capacity levels that people have down on paper. In essence, the market will remain tight.

What can the market do to ensure there will be enough supply to satisfy demand?

The market needs high prices to incentivize new investment. But there is more to it than that. You need local and central government support for projects. You need permits for environmental considerations and water. You also need the support of local communities as there can often be opposition to new projects so all this can take time. Good ESG credentials can also take time to work through. To bring a new greenfield project to fruition can take five to 15 years. Money is one factor but there are lots of other considerations.

In essence, there needs to be enough supply onstream in a timely manner.

Keep up to date with the latest news and insights in the lithium market by visiting our dedicated lithium page.