LITHIUM CONF: Lithium demand could outpace supply due to low prices, few projects
Published: Thursday, 13 June 2019
Global lithium demand could outpace supply in the coming years, with the number of new projects expected to fall short of expected consumption amid doubts on capital availability and low prices, market participants said on Tuesday June 11 at Fastmarkets’ 11th Lithium Supply and Markets Conference.
Still, major companies in Chile and Australia seem to
be best positioned to increase capacity. As a result, new
supply could come from low-cost producers rather
than marginal cost producers.
"The market seems to be in capital starvation. The question is
if it is so deep that supply won’t be as great as
expected going forward," McKinsey & Co leader for
electric vehicles Ken Hoffman said.
"New projects, at least conceptually, would be coming from
producers at the lower end of the cost curve, particularly from
Chile," Morgan Stanley managing director Javier Martínez
de Olcoz Cerdan said. "They have [virtually] unlimited
resources [and capacity increases would come at] low cost, low
Chile, for example, aims to maintain its current share of
global output, at around 32%. The country’s
ministry of mining estimates current projects around the world
are enough to bring global production to 1.5 million tonnes per
year from 2027 onward.
"We will need new supply after 2027 if demand expectations do
not materialize," Chilean vice minister of mining Pablo
Terrazas said. "Chile is the main lithium producer in South
America; we need to take the lead and sustainably increase
This could mean that original equipment manufacturers
(OEMs) will want to get more involved, granting capital
needed for this supply increase, Fastmarkets’ head
of battery raw materials research William Adams said.
"The environment is looking so constructive demand-wise for
many decades and low prices and depreciated equity markets
could mean there is not enough money coming to the industry at
a time when it is needed," he said.
The Chilean ministry of mining currently has three different
scenarios for world lithium demand and in most of them supply
would be tight.
A base-case of "medium demand" would mean consumption hits 1
million tonnes by 2027-28, Terrazas said. In the bullish one,
demand would total 1 million tonnes by 2024 and surpass 3
million tonnes in 2038. The bearish scenario contemplates 1
million tonnes in 2034-35, reaching around 1.1 million tonnes
Fastmarkets’ latest price assessment for
battery-grade lithium carbonate (minimum 99.5%) in China, Japan
and main South Korean ports was $11-12.50 per kg cif on June 6,
the lowest level since at least August 2017. Prices were at
$13-15 per kg on December 27.