Lithium mining investors warn bottlenecks could limit demand

By Martim Facada
Published: Thursday, 14 December 2017

Battery demand may be booming, but bottlenecks in processing, as well as cobalt and nickel production, could slow the growth in lithium consumption, investors have warned.

Tightness in cobalt and nickel supply, in addition to a shortage of processing capacity, represent a threat to lithium demand despite the booming battery market, investors said at the S&P Global Mining Outlook seminar, held at the end of October.

The mining industry would "struggle with the ability to deliver cobalt or nickel", Paul Gait, senior analyst at Bernstein Investment, told attendees at the mining briefing. Cobalt and nickel, along with manganese and aluminium, are key components used alongside lithium in batteries.

With battery demand rising rapidly, due to the shift toward electronic vehicles, lithium producers are preparing for increased demand. But, even if lithium demand were to rise as fast as expected, there is also the need for other battery materials, Gait said. "The fundamental bottleneck is in cobalt and nickel," he added.

If these additional materials cannot be provided, then battery producers will be unable to ramp up production, despite demand for their products.

Another potential bottleneck may lie in the conversion of Li2O spodumene into the lithium carbonate min 99.5% that is needed by battery manufacturers, George Cheverley, portfolio manager at Investec, warned.

"It’s easy to mine [spodumene]," he said. "The hard thing is producing lithium carbonate."

Li2O conversion capacity and enhancement in China is definitely causing problems, a Chinese producer told Industrial Minerals.

"Despite several converters in China being built at the moment, conversion capacity and enhancement of Li2O spodumene is problematic," the producer said. "Large amounts of 1.5% Li2O spodumene are currently being withheld in warehouses while purchasers wait to finish their enhancement and conversion plants."

If these bottlenecks develop, Li2O lithium spodumene prices could be less responsive to end-user battery demand than mining juniors have projected.