Why the lithium industry is heating up just as prices cool

Under pressure to meet rapidly growing demand from EVs and energy storage, the transformation of the lithium supply chain is speeding up.

By William Adams, Head of Base Metals and Battery Research

After an active start to the year in terms of lithium prices, the market has started to stabilize in recent weeks. That is down to a combination of buyers refraining from chasing prices higher, suggesting a degree of destocking, and also as higher prices and a swing round in premiums between different lithium materials have created incentives for convertors to provide what the market wants.

Transforming the lithium supply chain 
But, while price activity may have slowed, activity in the lithium industry has picked up. We expect that will now become the norm as the supply chain repositions itself to match supply to demand. The latter is likely to grow at an ever-faster pace as government incentives, government CO2 penalties, consumer choice and general market acceptance that change is upon us, merge to accelerate the move to electrification.

As the speed of the change picks up across the market and with battery raw material prices rising and supply already tight, battery manufacturers, EV makers and energy storage providers are expected to get more aggressive in securing their feedstock. That is likely to drive a lot more merger and acquisition activity, as well as offtake and investment deals.

Join us at Lithium Supply & Markets 2021 in Las Vegas to hear from the whole supply chain from miners through to the end-users and make connections to help you to capitalize on the changing market sentiment. 

For now, Ganfeng stands out as the champion. The Chinese lithium producer is building a diversified upstream supply chain, and it seems to be becoming a lithium behemoth. But, with news that LG Chem will spend $5.2 billion to build out its battery materials business, which will include setting up joint ventures with mining companies for the supply of raw materials, perhaps it too is looking to become an integrated supplier of lithium-ion batteries. 

world map of next-in-line lithium projects

Is this the start of a battery raw material ‘land grab’?

If it is, then lithium and other battery raw material assets are likely to become more sought after – this might be just what the industry needs to ensure a better chance of having enough material ready in a timely manner in the years and decades ahead. It also might see more big institutions, whether the big mining houses, or financial entities, get more involved as they realize lithium is moving from a small market to a much larger and critical market before their eyes – little wonder exchanges have been busy setting up lithium contracts

This article is a short extract from our weekly battery raw materials forecast, with news, analysis and price forecasts for lithium, cobalt, graphite, nickel and manganese. It also tracks projects and their impact on future supply. Learn more

What to read next
The company will be growing its battery-grade lithium carbonate or hydroxide production from its new direct-lithium extraction (DLE) project
Aluminium and nickel appear to have once again escaped inclusion in the latest list of sanctions imposed by western governments on Russia, ending days of speculation that increased both the prices and the traded volumes of the metals.
Swiss trader Glencore’s profits halved in 2023 due to weaker energy and metals prices and production, according to the company’s full-year results released on Wednesday February 21
Western Australia plans to offer tax breaks to nickel producers in a bid to help the ailing industry amid crashing prices, the state government announced on Saturday February 17
Volatile BRM prices can generate uneven profits and highlight the need for risk management
Manganese, chrome, tungsten and vanadium will be key topics of discussion at Fastmarkets' upcoming Asia Ferroalloys Conference 2024 in Hong Kong on February 26-28, after appearing on China's latest list of critical minerals