Lithium, the best performer among commodities this year with a whopping increase of over 410 per cent, will average higher next year too, though the rise may not be as phenomenal.
Currently, lithium carbonate — the main source for lithium, which is in demand for batteries in electric vehicles (EVs) — is quoted at 2.35 lakh Chinese yuan ($36,959) a tonne, which is 411 per cent higher year-to-date. The metal’s prices have skyrocketed this year due to an imbalance in global supply amid huge demand.
According to Fitch Solutions Country Risk and Industry Research (FSCRIR), lithium carbonate prices will average around $21,000 a tonne and lithium hydroxide at $20,812 next year — a rise of 16.3 per cent and 21 per cent, respectively, from this year’s average price.
Lithium carbonate and lithium hydroxide prices had gained an average 183 per cent and 136 per cent, respectively, this year, Fitch said, based on its annual forecast.
Gold futures extend gains, jump Rs 600 in two days
Luke Sweeny, a contributor to Energy and Capital Website, said price increases for 2022 are all but guaranteed at this point for lithium. “The supply side is already expanding as fast as possible, but demand is outpacing it 10-fold,” he said.
Record EV sales
Resurgent demand for EVs, whose sales have surged, is primarily behind the huge rise in lithium prices. According to BloombergNEF (BNEF) data, EVs, including battery electric and plug-in hybrids, made up 7.2 per cent of global car sales during the first half of this year. Sales were up from 2.6 per cent in 2019 and 4.3 per cent last year.
BNEF said this year would witness another record for global EV sales with 5.6 million being sold, up 83 per cent over last year and 168 per cent over 2019.
EV sales have surged mainly in China, the US and Europe by 160 per cent in the first half of this year, with Beijing accounting for 12 per cent of total sales.
Chinese research firm Antaike analyst Zhang Zhiwei told a lead and zinc conference recently that EVs are sensitive to the price of lithium batteries, probably indicating resistance ahead.
Bearish trend likely in base metals in 2022
S&P Global Market Intelligence said in its outlook that lithium chemical supply is forecast at 636,000 tonnes of lithium carbonate equivalent in 2022, up from 408,000 tonnes this year.
Metal’s supremacy continues
Sweeny said EVs will be the biggest lithium hog in the industry. Though progress is being made on other battery types, the lithium-ion cell’s supremacy reigns now.
Fitch Solutions said lithium would, however, head lower in 2023 and drop by 9.5 per cent over next year’s prices as companies would improve supply with development being accelerated and some players resuming operations that had been suspended when prices crashed.
“The ongoing consolidation among lithium players is a sign of rising interest in the sector and increased financing capacity to develop projects in the coming years,” FSCRIR said.
While global supply will gather pace from 2023, demand growth will also be buoyant in 2023 as key economies continue to progress towards EV penetration, which will prevent prices from declining. But the situation could turn hot from 2025, when the lithium market could shift to deficit.
Green transition
The research agency forecast growth in global lithium mine production in the coming years even as existing new projects progress quickly. This will be due to the momentum in green transition and batteries.
Lithium is preferred in EV batteries as it is a light metal and the least dense solid element with good electro-chemical potential due to its low melting point. Lithium carbonate is derived through two processes. One method is to extract lithium from minerals found in igneous rocks composed of large rocks or spodumene. Two, it can be obtained from water with a high concentration of lithium carbonate. Both methods contribute almost equally towards lithium carbonate output currently.
Lithium carbonate, the main source for lithium, is a stable salt that is refined to produce lithium. According to Barrons, 5.3 tonnes of lithium carbonate can be refined to produce one tonne of lithium.
Mineral reserves
NS Energy Business has projected global lithium mineral reserves at about 80 million tonnes (mt), with Bolivia holding the most (21 mt). Argentina has 17 mt and Chile 9 mt. The US has 6.8 mt and Australia 6.5 mt, apart from China holding 4.5 mt of lithium mineral reserves.
In India, the Atomic Minerals Directorate for Exploration and Research, an arm of the Department of Atomic Energy, has projected 1,600 tonnes of lithium resources in the Margalla-Allapatna rocks region in Karnataka’s Mandya district.
An EV needs 10 kg of lithium, and one tonne of the metal can meet the demand for batteries in 90 electric cars. Research shows that to produce one million EVs, about 60,000 tonnes of lithium are required.
Lithium balance sheet
F - forecast
Figures in ‘000 tonnes
Source: Fitch Solutions