Why North America needs regional price references for lithium

With the recent launch of US/Canada lithium prices, Fastmarkets explores the motivation for the introduction and the reasons why this is an important development for the North American market

Planned gigafactory development exceeds 1,000 GWh

There are currently 27 battery electrode and cell manufacturing plants in the US, totaling some 280 GWh of annual capacity. However, only 12 of these have capacity over 1 GWh and can be classified as “gigafactories”.

Companies have been taking advantage of the attractive incentives and support on offer at both a state and federal level, to establish additional gigafactories within the US, to supply both the electric vehicle (EV) and energy storage system (ESS) sectors.

A further 40+ gigafactories are currently under construction or planned in the US, totaling over 1,000 gigawatt hours (GWh), more than tripling the countries current annual production capacity.

This will inevitably drive demand for lithium in the region, increasing liquidity in the US market. This necessitates a suite of lithium prices that capture and reflect the impact of this demand growth in the region, whilst providing increased transparency.

US lithium demand to grow at CAGR of 29% between 2023 and 2030

As a result of growing demand for EVs in the US and the development of downstream facilities, we expect lithium demand from EVs in the US to grow at a compound annual growth rate (CAGR) of 29% from 70,000 tonnes lithium carbonate equivalent (LCE) in 2023 to 412,000 tonnes LCE in 2030.

Increased liquidity necessitate regional prices

To satisfy downstream demand for lithium, both domestic lithium resources and conversion facilities utilizing imported material are under development.

The US is well endowed in the metal, albeit a large proportion of this is locked in unconventional resources.

Fastmarkets has identified plans for at least 450,000 tonnes of battery grade chemical production in the US, a select group of which is displayed in the map below.

With an increase in both domestic production volumes, as well as imports of lithium raw materials and chemicals, there will be an increasing need for a suite of regional lithium prices to account for this growing liquidity, which should be beneficial to lithium project development in the US.

IRA legislation expected to create price differential

In tandem with demand growth, is the enactment of the Inflation Reduction Act (IRA), which will have a material impact on evolving battery supply chain dynamics in the region.

The sourcing requirements to be eligible for tax credits offered under the IRA are expected to result in a price differential (premium) compared to other regions.

Fastmarkets United States Clean Vehicle Tax Credit (30D): incentive for consumers and OEMs infographic

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