Once considered a specialty chemical produced and
sold on spec for niche uses, lithium looks set to join the
ranks of the world’s traded commodity products -
albeit in relatively minor volumes.
Increasing production of lithium chemicals from
diverse sources, higher quality requirements in China and
frequent and sudden adjustments in global supply and demand
have led to price volatility in lithium materials and made
these products more fungible.
Growth in Chinese lithium compound production and
the rising number of companies able to supply good quality
lithium, domestically and overseas, have been major factors in
transforming lithium into a commodity-type product.
China accounts for over 65% of global battery
production and more than half of the world’s total
lithium chemical production.
Fastmarkets analysts expect global supply to reach
355,000 tonnes of lithium carbonate equivalent (LCE) in 2019 on
rising Chinese production, outstripping demand of 300,000
The most commonly produced lithium-ion batteries
in China are lithium iron phosphate (LFP), lithium manganese
oxide (LMO), lithium nickel-cobalt-manganese (Li-NCM) and
lithium cobalt oxide (LCO).
These can be produced using different grades of
lithium carbonate and hydroxide.
LCO batteries are widely used in electronic
consumer products, Li-NCM are mostly for pure electric vehicles
(EVs), while LMO and LFP batteries are used in plug-in hybrid
EVs (PHEV) and E-buses.
Along with increased adoption of pure EVs and
consumer demand for vehicles with longer driving ranges, global
battery makers are looking to increase their market share in
high-end battery chemistries, such as NCM 622 and 811, which
require higher quality lithium carbonate and hydroxide.
Competition to drive down
"As competition rises with more producers able to
produce battery grade material, [lithium compound] prices will
fall," William Adams, head of battery raw materials research at
"To take advantage of weaker prices, consumers
will qualify more suppliers and that will further commoditize
the products - we have already seen this start to unfold over
the past year. Chinese producers have increased exports to
global battery and EV makers since 2018," he added.
For most of 2019, surging supply of lithium
chemicals from China has led to more competitive prices for
consumers in Japan and South Korea.
Lithium prices have fallen for most of 2019 in
China. As of mid-October, the lithium carbonate, 99.5% Li2CO3
min, battery grade, spot price exw domestic China, had fallen
by 40% year on year to 56,000-61,000 yuan ($7,829- 8,528*) per
tonne, from 72,000-80,000 yuan per tonne a year earlier.
Hydroxide monohydrate prices have been on a
similar downtrend. Fastmarkets’ assessment for
lithium hydroxide monohydrate 56.5% LiOH.H2O min, battery
grade, exw China, has plunged by 44% over the same comparison
period to 60,000-68,000 yuan per tonne from 110,000-120,000
yuan per tonne.
Japanese and South Korean cathode and battery
makers have responded by procuring more material from China at
fixed prices on a shorter-term basis of up to three months to
one year, to manage the risk of falling prices.
"Some legacy lithium producers had limited
capacity to supply the Japanese and South Korean markets over
the past year, [but] good quality material alongside the lower
prices offered from China have triggered an increase in Chinese
exports to Japan and South Korea," Daniel Jimenez, partner at
mining consultancy iLimarkets, told Fastmarkets.
The pool of battery-grade lithium producers in
China, which currently comprises the likes of Tianqi Lithium,
Ganfeng Lithium, General Lithium and Yahua Lithium, will likely
keep increasing in size, analysts say. And, as more processors
learn how to refine impurities, it will become easier to
produce standardized products.
Physical proximity between lithium producers and
consumers in China has allowed for shorter delivery terms - of
five to 30 days - contributing to the booming Chinese spot
market, in comparison to the typical mid- to long-term
contracts in the rest of the world, which has historically been
supplied by South American countries.
This increased delivery speed has contributed
greatly to the commoditization of the lithium market.
*Conversion made October 2019
Battery Materials Europe 2019: Lithium
prices to fall further
Price volatility in the lithium market is expected
to persist for the foreseeable future, lithium companies and
analysts said at Fastmarkets’ inaugural Battery
Materials Europe Conference in Amsterdam in September.
The rapid supply response in China and Australia
over the past two years has significantly increased the volume
of material on the physical market, together with the choice of
suppliers, delegates said.
On the sidelines of the conference, lithium
producers told Fastmarkets that the large volumes of lithium
chemicals produced in China were a major cause of the fall in
prices, which they expect to slide further before the end of