New investments are key
A scarcity of capital in the lithium sector is a concern for
many market participants, given the expected growth of
Although consumption of lithium carbonate equivalent is on
track to grow to 1 million tonnes by 2025 from just below
300,000 tonnes in 2018, supply from new projects may fall
short of this increased demand, depending on the pace of
growth in the electric vehicle (EV) market.
Global output should approach 1.5 million tonnes per year in
2027, according to calculations from Chile’s
ministry of mining, but it sees this as the
sector’s maximum capacity, taking into account all
current exploration projects.
New investment in Chile’s domestic lithium
sector totals $1.81 billion, minister of mining Baldo
Prokurica said. "[But] the world will need more lithium and
we need more projects than today," vice minister Pablo
"We want state and privately owned companies mining lithium
in Chile," Prokurica said.
Although the EV sector is growing rapidly while automakers
from the United States, Europe and China invest in higher
capacity, upstream investment is trailing, Anthony Tse, chief
executive officer at Australia’s Galaxy Resources,
"We are still lacking some $2 billion a year, still dwarfed
by the amount of investments on downstream," Tse added. "We
can’t wait to invest in 2025 as the projects
will take a couple of years to build."
China’s EV subsidies to be replaced by
Government funding for automakers will continue to ebb,
while regulations on carbon emissions become stricter.
The latter will be supportive of increased production of new
energy vehicles (NEVs) in the coming years, market
Flexibility is essential for survival
Lithium carbonate is set to remain the most widely used
lithium compound in lithium-ion batteries in the coming
This is despite market participants anticipating lithium
hydroxide overtaking lithium carbonate usage once production
and adoption of nickel-rich cathodes, such as
nickel-cobalt-manganese (NCM) 622 and 811, which typically
use hydroxide, ramp up.
Producers Albemarle, SQM and Tianqi agreed that flexibility
remains vital for addressing diverse industrial and
Nickel-rich batteries to dominate in the next few
Delegates agreed that lithium-ion batteries with higher
nickel content will dominate the market in the foreseeable
Despite increasing short-term use of lithium-iron-phosphate
(LFP) and lithium-manganese-oxide (LMO) batteries in China,
production and consumption of more advanced nickel-rich NCM
622 and 811 batteries are set to increase.
Industry increasingly moving away from
Social and supply issues are prompting the battery sector to
reduce cobalt usage. Higher-nickel batteries are already seen
as the next step to lowering cobalt content, but the metal is
still needed to improve safety and energy capacity.
"The industry is getting a lot of pressure from end-users
after child labor in the Democratic Republic of the Congo was
exposed," Yuan Gao, chief executive officer at Pulead
Technology Industry, said.
Social awareness is driving development of new chemistries in
li-ion batteries, ESK Consulting lead consultant Jaime
Alée added. NCM811 batteries (80% nickel, 10% cobalt
and 10% manganese) are already in production; cobalt demand
growth has receded, he added.
While lithium demand growth will more than triple over the
next six years, cobalt usage in batteries will grow at a slower
pace to 110,000 tonnes in 2025 from 50,000 tonnes currently,
according to Pulead’s estimates.
Supply disruptions caused by political instability are also
prompting substitution of cobalt with other metals in
"The industry would love to depend more on manganese than
cobalt," McKinsey & Co leader for EVs Ken Hoffman said.
Chile is reshaping regulations
Chile’s ministry of mining is planning to unveil
new regulations for lithium mining in the country that it
hopes will attract investment in the sector.
Chile classes lithium as a strategic material, having been
designated as such by the Augusto Pinochet administration in
1979. This is why SQM and Albemarle are in control of most
domestic reserves, according to Chile’s
A new "national lithium policy" should garner interest in
the mineral from state-owned Codelco and Enami. Both companies
are already planning on exploiting existing resources.
"We already have a modern comprehensive mining code that
protects investment," minister
Prokurica said. "We are aware of the boom in electromobility
and its value chain, and want Chile to take part in it."
Fastmarkets-LME lithium price partnership cautiously
Market participants at the conference largely gave a
qualified welcome to news that the London Metal Exchange and
Fastmarkets have partnered to develop the lithium price
Vivian Wu, president of Tianqi Lithium, the largest producer
of lithium compounds in China and which has a 23.77% stake in
SQM, said such a contract would be helpful to the company and
James Calaway, chairman at Ioneer Ltd, said it will be
extremely constructive for the industry to have symmetrical,
unbiased price discovery and forecasts. The price will
provide emerging market participants with more transparency
and a new financing and hedging alternative, he added.