LME WEEK 2019: Lithium could see further boom-bust cycles in long term

Demand for lithium carbonate is probably fully covered until 2025, but the market could return to undersupply due to the current investor hesitance to invest in the lithium supply chain.

A lack of investment in the lithium supply chain could push the market back into undersupply in the second half of the next decade, and further boom-bust cycles may follow, delegates at the London Metal Exchange’s LME Week heard.

A shortage of lithium is being forecast in the long term due to the lack of investment in mining projects, speakers and panelists said during a panel discussion at the event last week.

Demand for lithium will catch up with today’s oversupply but, given the weakness in prices, miners were reluctant to invest in new or expanded capacity, because this could move the market into undersupply by the middle of the next decade, they added.

As a result, the market will experience further boom and bust cycles, according to Daniel Jimenez, partner at consultancy iLi Markets, who was speaking on the LME Week Battery Materials panel on October 31.

William Adams, head of base metals and battery research at Fastmarkets, described the electric vehicle (EV) and battery materials market as being in a “valley of disappointment,” in a presentation that preceded the panel. These sentiments were later echoed by the panelists.

The lithium market has been facing low prices, a weakening global economic outlook, a softening in demand for EVs, and lithiummining projects that have either cut their output or halted altogether.

Weak prices forecast
Adams told delegates that, as a result of the weak outlook, battery-grade carbonate prices will stay below $10 per kg but will begin to recover around the middle of 2020.

Fastmarkets’ assessment of the lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea, was $9-11 per kg on October 31. This was down by 29% from $13-15 per kg two years ago.

The downturn in the market was the result of an increase in lithium supply as well as increased capacity to convert material, which have caused the move to oversupply.

Producers were taking a short-term view of the market, according to Jimenez. Demand may reach an estimated 1 million tonnes per year of lithium carbonate by 2025 but that demand will be met by expansions and projects already in the pipeline, he said.

In the longer term, however, tightness could prevail.

There will be an additional 1 million tpy of lithium carbonate demand from 2025 through to 2030, bringing the total to 2 million tpy, Jimenez said. “We have no clue where that supply will come from,” he added. “A boom-and-bust cycle will return again.”