Lithium Supply & Battery Raw Materials 2022 – what we learned

Key lessons from our flagship energy transition event, bringing together +650 attendees from the global battery raw materials community to discuss challenges and opportunities along the entire supply chain

The battery raw materials industry continues to play a key role in the energy transition as we strive for a lower carbon economy. In June, experts from across the BRM supply chain came together in Phoenix to provide insights and guidance into the key trends and challenges in the market. Presentations and panel discussions covered everything from the lithium supply/demand balance to the changing geopolitics of the market, as well as how ESG concerns are shaping the approach to investment in BRM production.

At the end of this article, you can view some highlights from the event on video.

Here are some of the key takeaways from the Lithium Supply & Battery Raw Materials 2022 event:

Industry expects further lithium price increase, but prices will eventually correct

Lithium spot prices are currently close to historic highs as supply constraints put pressure on the spot market.

Fastmarkets assessed the price of lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea at $71-75 per kg on Monday July 11, up by more than 421% year on year.

Fastmarkets assessed the lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea at $72-78 per kg on Thursday July 7, up by around 383% year on year.

However, there was an emerging consensus within the industry that while further price increases are expected due to continued strong demand, spot prices would eventually correct as more supply becomes available to the market.

“We think prices will still go higher,” one consumer told Fastmarkets, “but we think they will correct by 2025,” they added.

“The issue is less how high do prices go; it’s where do we correct to?” Chris Berry said on a panel focused upon risk management in lithium.

Research analysts at Fastmarkets concur with this view, forecasting that lithium carbonate, battery grade cif and cjk spot prices could rise to a midpoint of $80 per kg in the first quarter of 2023, before eventually easing to $68 per kg in the fourth quarter of 2023.

Like many other battery raw material prices, lithium also faces macroeconomic headwinds such as expectations of a recession and interest rate increases.

Securing lithium supply now the primary concern for battery materials

Supply concerns could act as a support for lithium prices.

Speaking on a panel discussion focused on battery materials pricing, Fastmarkets head of base metal and battery materials research William Adams noted that “two or three years ago our biggest concern for supply was nickel.” However, following a significant ramp-up in nickel production from HPAL projects in Indonesia, the primary area for concern is now lithium supply.

Fastmarkets research currently forecasts that the lithium market will experience a supply deficit of 89,000 tonnes in 2023.

“We are less concerned around nickel than we are lithium,” one consumer told Fastmarkets.

This view was shared by many in the conference, with panelists in one session noting that securing supply of lithium should be all consumers’ top priority.

“This is a tough market to get into and secure supply if you’re not involved early,” one trader said.

Much more supply needs to come online in order to catch up with growing lithium demand, according to some market participants at the conference.

“You need 200,000-300,000 tonnes of lithium supply to come online every year, you need two to eight new projects coming on stream every year,” Felipe Smith, senior commercial vice president of lithium at SQM, said. “This is a big challenge.”

“Lithium producers must double their output every 2-3 years to keep up with 2030 demand,” said Eric Norris, president of lithium at Albemarle Corporation. “No producer has been able to do that reliably to date.”

The supply crunch has some downstream consumers considering accelerating their purchasing approval processes in order to take in more supply on the market.

“Battery manufacturers are changing their practices and changing their lead times for qualification,” one battery manufacturer said.

In some regions such as the US, strict mining permitting legislation is expected to make it more difficult for regional supply to come online in a timely manner.

Attention builds on the viability of black mass trade

There was a noted increased in the number of discussions around the potential role of “black mass” in meeting the supply demands for nickel, cobalt and potentially lithium. Black mass is produced via the recycling of end-of-life batteries and has the potential to help ease the supply/demand imbalance while also boosting the environmental, social and governance (ESG) credentials of the industry.

“I get a lot of questions nowadays from participants, ‘what is the price of black mass?’” Chris Berry, president of House Mountain Partners, said.

While some within the industry note the need to develop global specifications for a trade market to emerge, companies have already been investing heavily in the space, with multi-national trader Glencore partnering with recycler Li-Cycle and BASF announcing they will build a commercial plant in Germany.

But participants also noted that securing the batteries for recycling could prove to be a potential pinch point for the market.

“Transporting the black mass will be the easy part,” one recycler told Fastmarkets on the side lines of the conference, “the headache comes from actually securing the batteries to produce it.”

ESG expectations are shaping the industry’s approach to lithium production

Sustainably sourced lithium was a key focus for market participants throughout the lithium supply chain.

Having ESG credentials has become more important for producers than ever before.

“ESG criteria is key, but to do well it requires even more investment and innovation,” said Dale Henderson, chief executive officer at Pilbara Minerals. “How we’ve done things in the past will not be accepted, a lot more work [needs] to be done.”

Producers of lithium said having strong ESG credentials makes them preferred suppliers for downstream consumers, helps newcomers to the market secure funding and, in some cases, could lower operating expenses.

But producers imposing a price premium for sustainability remains non-existent. Downstream consumers are said to reject higher prices for sustainability credentials.

Some market participants say the lack of an industry-wide specification defining those credentials also makes it difficult to impose a premium.

High prices expose market participants to volatility, but there are ways this can be managed

For those trading in the battery raw materials market – particularly lithium – it is challenging to track all movements and developments that will affect price; so, market participants can become more exposed to financial risks.

Fastmarkets’ senior price development manager, Peter Hannah, says that – for lithium – a more mature spot index-based pricing mechanism with a transparent price signal will play a vital role in moderating volatility over the long term. To read more about how you can manage price volatility in the lithium market, Peter Hannah shares his insights here.

Watch the highlights from the event

View some of the highlights from the Lithium Supply & Battery Raw Materials 2022 below:

Registration for next year’s event is now open

Registration for Lithium Supply & Battery Raw Materials 2023 is now open and we hope to see you there. We’ll be back in Las Vegas on 20-22 June for an event that’s bigger and better than ever. Learn more and register here.

Callum Perry and Justin Yang contributed to this report.

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