"As the market starts to recover in demand, the challenge
will be meeting that demand, and adding that capacity fast
enough [to meet demand growth]," said Tina Craft,
Albemarle’s chief commercial officer and vice
president of commercial operations.
While the lithium market has been going through a
prolonged bearish cycle in 2019 and 2020, characterized by
oversupply and low prices, the outlook remains one of
long-term growth for the sector, fueled by the push towards
electromobility in both Asia and the West.
Lithium demand is expected to grow to about 900,000 tonnes
LCE (lithium carbonate equivalent) per year by 2025,
according to William Adams, Fastmarkets’ head of
battery raw materials and base metals research, compared with
a consumption of 300,000 tonnes estimated for 2020.
Low prices had previously prompted producers to hold their
expansion plans but, against the expected long-term bullish
outlook, these would have to resume to follow the market
The availability of capital needed for such growth will be
a determining factor in this sense, according to
Livent’s chief commercial officer, Walter
Czarnecki. "Total demand for lithium is set to triple in next
decade. That’s $10 billion of expansion capital
needed, from an industry generating $3 billion today,"
The ongoing Covid-19 pandemic and its widespread effect on
the performance of national economies and supply chains adds
to the difficulty in outlining future business strategies and
setting out timelines for investment. This translates into an
issue of timing for deploying capital into new processing
capacity. "You have to make those decisions 18-24 months
before a plant comes online: [you have to be] able to see
when demand starts to pick up and have confidence in the
right economics to invest in lithium supply," Craft said.
"The resources are there. It’s about having
the economics in place that support the build-up of your
Expansion plans on hold
Czarnecki spoke about how Livent suspended all deployment
of growth capital for expansion, citing the bearish lithium
price environment during 2019-2020 as a fundamental
consideration in driving this decision. Back in February, the
company announced it was delaying its planned schedule of
expansion due to low prices.
Albemarle responded to the falling prices and overcapacity
in a similar way.
"In 2019 we responded [to the weak pricing outlook] by
reducing some of our conversion capacity plants we thought we
were going to bring online after 2021. This has been slowed
out [further] with Covid-19," Craft said.
Albemarle announced last year that it was postponing the
works at its Salar de Atacama facilities in Chile, La Negra
III and IV.
SQM has so far maintained its scheduled expansion plan
– aiming to reach an output of 120,000 tonnes of LCE
in 2021. "We are confident about the demand trend.
Although the first half of the year was very weak, in the
last few months we’ve seen better demand. Europe
EV sales are showing a good trend. All in all, we estimate
demand for 2020 would be similar to 2019," SQM’s
commercial vice president for lithium, Felipe Smith said,
citing some applications showing growth such as portable
devices and e-bikes in China.
Chemistry and recycling
Lithium-ion battery recycling activity could increase to 2.6
million units between now and 2030, and could return
thousands of tonnes of key raw materials to the battery
A total of 46,300 tonnes per year of cobalt, 40,000 tpy of
lithium, 27,000 tpy of manganese and 125,000 tpy of nickel
could be efficiently recycled to a quality high enough that
the materials could be re-used in battery cells, Ajay
Kochhar, president and chief executive officer of Li-Cycle,
said during the online event held October 26-28.
The US-based battery recycling company was already
processing "thousands of tonnes of lithium-ion batteries" and
returning product to the supply chain, he said. This was
"meeting the needs of high purity lithium-ion battery
customers" including automotive sector companies.
"We see a robust pull for nickel sulfate, cobalt sulfate,
lithium carbonate, manganese sulfate and graphite from the
supply chain, including battery manufacturers, and portable
electronics and electric vehicle manufacturers," Kochhar
But it was unclear what disruptive effect these volumes of
recycled materials might have on the draw for primary
supplies of battery raw materials.
Speakers on this year’s battery panel agreed
that, excluding some currently unknown disruptive technology,
lithium would be a mainstay of the mobile battery unit for
the foreseeable future. It was questionable what percentages
of other materials such as nickel, cobalt and manganese these
cells would require. The cost may affect the desirable amount
of each raw material in the battery cell.
This has been notable in the cobalt market, where a price
rally to a 10-year high of $45 per lb in April 2018 spooked
some in the battery supply chain, while questions over the
ethical sourcing of cobalt prompted some automotive companies
to look at cobalt-free batteries.
Fastmarkets’ price assessment for cobalt
standard grade, in-whs Rotterdam, was $15.50-15.95 per lb on
Friday October 30. This was up from a low of $13.75-14.05 per
lb in late July, with the price rising as economies recovered
from Covid-19-related lockdowns.
"[The battery supply chain] will remain a diversified
field in terms of battery chemistries, and that is why
[electric car manufacturer] Tesla is hedging bets on a
variety of chemistries, because the future is uncertain,"
Chloe Holzinger, senior analyst with IHS, said.
"Automotive original equipment manufacturers [OEMs] will
use different cathodes and batteries from different
suppliers, so they can address different types of automotive
industries, and to protect themselves against potential
volatility [in raw material supply]," Holzinger added.
Cobalt-free batteries will certainly be part of a suite of
products offered by electric vehicle producers, although
cobalt will remain a key part of products which will be used
for longer driving ranges – nickel, manganese,
cobalt, (NMC) batteries.
While cost can dictate the level of each material in the
battery pack, the performance of the battery can influence
this too. Enhancing the energy density in the pack is an area
of development for the battery makers and consumers. Moving
the battery from 260 Wh per kg, which is typical of what is
seen on the market today, to 435 Wh per kg by 2022-23 is a
goal for solid-state battery developer Solid Power.
This can be done by thinning the separator material,
increasing the loading of the cathode or the ratio of NMC
metals in the battery within an NMC 622 or NMC 811 battery,
according to Dean Frankel, who leads supply chain development
at the US-based company. Performance was also being targeted,
he said, with a projection for 1,200 battery cycles with 80%
Lithium spot prices are starting to change direction
upward but it will take time for a rebound across the whole
lithium complex, Fastmarkets head of battery raw materials
research and base metals William Adams said during a panel
"We’re starting to see a move up [for spot
prices] and by the end of next year will start to see all
[lithium] prices moving up," said Adams.
Lithium is a key ingredient in the manufacture of
batteries for electric vehicles (EVs) and energy storage
systems (ESSs), and lithium demand for both uses is expected
to soar in the coming years alongside the shift to greener
Prices for lithium surged over 2016 and 2017 in
anticipation for this incoming demand, but capacity
expansions outstripped demand growth between 2018 and 2019,
triggering a slump in prices. The outbreak of the Covid-19
pandemic at the start of 2020 added further bearish
Yet in the key consuming market of China, the price of
lithium carbonate has broken out of stalemate in recent
weeks, with more producers insisting on higher offers due to
increased orders from downstream cathode producers.
Fastmarkets’ weekly price assessment for
lithium carbonate, 99.5% Li2CO3 min, battery grade, spot
price range, exw domestic China was 39,000-41,000 yuan
($5,651-6,097) per tonne on Thursday October 22, posting a
second consecutive weekly increase from 37,000-41,000 yuan
per tonne on October 8.
During the same panel discussion, Tianqi Lithium sales
director Ron Mitchell said the demand outlook from the EV
sector is looking positive and his prediction for the fourth
quarter of 2020 looks equally positive. On the impact on
lithium prices of a possible second lockdown across countries
due to the Covid-19 pandemic, Mitchell said: "The impact of
Covid has been varying so far and many companies have showed
resilience, at the moment supply chains remain open and
distribution channels remain open."
Mitchell added that the only threat from a second wave of
lockdowns could be on downstream production, which could have
a short-term effect on prices, but he did not see it as "a
Despite a positive demand outlook, any increase in lithium
prices could be capped by a current build-up of inventory
along the supply chain and the presence of idle capacity,
conference delegates heard.
"The positive news is that demand [from the EV sector] is
picking up very quickly but on the other hand [lithium]
prices in China had bottomed out already and we have to
consider they were at a very low level below marginal costs
of production so the [increase] is a correction," Daniel
Jimenez, partner at Chile-based mining consultancy firm
"We still have a big disparity between prices in China and
outside of China and we have a lot of supply coming into the
market from SQM [Sociedad Qumica y Minera de Chile] for
example," he added.
"So in terms of what is going to happen in the next few
months it is probably a convergence of prices in China and
outside of China as we are still in an oversupplied market.
The impact of Covid-19 has certainly been negative but the
market was oversupplied already before the pandemic had
started," he warned.
Chilean lithium producer SQM has capacity to produce
75,000 tonnes per year of lithium carbonate equivalent (LCE).
It previously announced expansion plans to allow it to reach
production levels close to 200,000 tpy of LCE in the long
The lithium market has fundamentally changed and the
customer landscape has also changed significantly, leading to
a higher focus on price transparency alongside considerations
on supply security, Mitchell said on the topic of price
evolution in the lithium industry.
Lithium hydroxide development
The development of lithium hydroxide facilities is a
priority for Australia’s renewed critical
mineral strategy, said Jessica Robinson, head of the
Australian government’s Critical Minerals
Facilitation Office. "We are already the largest producer of
lithium and we have the second-largest reserves in the
world… Now we are looking to move further down the
supply chain," she added.
The country produces about half of the
world’s lithium from hard rock lithium
concentrate, called spodumene, which is converted into
lithium hydroxide for battery manufacturers and is processed
mostly in China. The Australian government is looking to
attract investment along the supply chain for the critical
minerals sector, not only in exploration and extraction, but
also in the production and processing stages.
On October 20, the federal government released the
Australian Critical Minerals Prospectus 2020, which outlines
more than 200 potential investments in 24 critical minerals
and rare elements, including lithium, cobalt, manganese,
antimony, tantalum, tungsten, vanadium and niobium.
"Part of the rationale to take extra steps [in the
critical minerals strategy] is real appreciation of the
vulnerabilities of some of the supply chain, lithium being a
key item," Robinson said.
Lithium hydroxide consumption is on the way to accounting
for 60% of the market and, by 2028, will account for nearly
two-thirds of lithium supply, according to analysis from
advisory firm RK Equity.
To meet the expected growth in demand, Australia has five
operating lithium producers, and three mines in development
in Western Australia – two for spodumene and one for
lithium hydroxide. Robinson expected these to be running by
2022. These projects are the Finniss Lithium Project, owned
by Core Lithium; the Kathleen Valley lithium-tantalum
project, owned by Liontown Resources; and Mt Holland, owned
by Covalent Lithium with an offtake agreement with LG
Robinson also pointed out the complexities of the lithium
market, which has been going through a prolonged bearish
cycle in 2019 and into 2020. This was characterized by
oversupply and low prices, which have been a deterrent to
attracting further foreign investment over the past year.
"The production of lithium was scaled back in recent times
and Australian producers have been affected by that. [There
has] been a pullback in capital expenditure and public
confidence that [has made] investment and cash injections
into these projects more difficult in recent times," Robinson
"But there is a huge expected uptake, with lithium
producers expecting to increase their exports by 75% in 2022,
and demand will continue to grow exponentially," she added.
About 920,000 tonnes of lithium will be required by 2025 to
meet forecast demand from the growing electric vehicle (EV)
and energy storage sectors, according to data from
Fastmarkets’ battery raw materials research
Robinson also noted the benefits of lithium spodumene in
being adaptable to changes in market dynamics. "The benefit
of hard-rock production is the flexibility to scale up and
quickly bring in production in around two or three
years’ time, versus seven to ten years in brine
production," she said.
"Spodumene facilities can also be turned on and off
relatively quickly, which means that, in terms of Covid-19,
operations can quickly adjust to market changes," she
To promote investment, tax incentives in the resources
sector are worth as much as $2 billion for activities across
the board, and are also open to foreign countries, Robinson
Australia has finalized agreements so far with the United
States, India, South Korea, Japan and Canada in an attempt to
support projects and to develop critical minerals and rare
"We are also doubling down our engagement with the UK,
Japan, South Korea and the EU," she said. "We are committed
with a range of countries to helping to diversify and secure
global supply chains."
China is currently the key player in the lithium-ion battery
supply chain and will remain dominant for the next five
years, according to the head of energy storage at Bloomberg
New Energy Finance.
Because China has the biggest lithium-ion battery
manufacturing capacity and has greater direct and indirect
control over most raw materials for batteries, it will
maintain its leading role in the lithium-ion battery supply
chain from now until 2025, noted James Frith, head of energy
storage at Bloomberg NEF. The organization had published a
lithium-ion battery supply chain ranking showing each
country’s position in 2020 and where it will be
in 2025 based on its current development trajectory in
several key sectors, including raw materials, fuel cells and
components, the environment and demand.
Among 25 countries ranked in the battery supply chain,
China is expected to remain the global leader until 2025
– not only because it has the largest industry
overall, but also because it has the biggest end-user market,
according to Bloomberg NEF.
Japan currently ranks second in the lithium-ion battery
supply chain and is also expected to maintain its position
through to2025, Frith said. South Korea comes third in 2020,
but by 2025 it will have fallen to eighth due to a "poor
environmental score," Frith said, largely due to its very
high power-transmission grid emissions of about 400g of
carbon dioxide per kWh produced. Most other countries are
reducing their grid emissions to become cleaner and greener,
Sweden is expected to rise from tenth now to fourth in
2025, while Germany, France and Finland are all in the top 10
from 2020 to 2025 because of strong support from their
governments in the new energy vehicles (NEV) sector.
The United States, meanwhile, is expected to move up from
sixth place in 2020 to third in 2025, while the other top-10
countries are the United Kingdom and Canada. "In the US,
[while] there is not as much government support as in
Europe... the country will move up the rankings because so
many manufacturing plants and component manufacturing
[facilities are] being built there, and [the country] also
has some [of the key] raw materials," Frith said.
The ranking for the lithium-ion battery supply chain is
mainly to better understand that supply chain and to gain
some insight into where future opportunities might lie.
Frith said the world's total lithium-ion battery
manufacturing capacity was expected to be 525 GWh by the end
of the year in 2020, with 78% of that manufacturing capacity
located in China. By 2025, however, the total capacity for
making lithium-ion batteries will have more than tripled to
1,798 GWh, and China will still have the majority of
manufacturing capacity by then – although its share
is expected to fall to 68%, with Europe likely to be making
the most inroads in terms of increasing its market share.
In addition to its dominance in battery production, China
has a major influence in the mining and refining of battery
raw materials. China has greater direct and indirect control
over the key battery raw materials than other countries and
is the only country with direct access to captive supplies of
all the key materials – including graphite, lithium,
nickel and cobalt, among others – although only tiny
amounts of some of these products are to be found in
Time for a lithium futures contract
Robin Martin, head of market development at the London
Metal Exchange, said that the lithium market has grown to a
stage where it can support a futures contract, especially in
the context of significant price moves in recent years and
forecasts of further growth.
"In terms of size, [lithium] is now at a level where it
can support an actively traded contract. We’re
expecting this market in physical terms to grow by an order
of magnitude over the next 10 years so that gives us ample
runway, but we’re at critical mass it terms of
size today," Martin said during an interview at the
Lithium production is expected to grow to 430,000 tonnes
in 2021. Demand will grow to 345,000 tonnes next year,
compared with an expected 285,000 tonnes this year, according
to data from Fastmarkets’ battery raw materials
research team. About 920,000 tonnes of lithium will be
required by 2025 to meet forecast demand from the growing
electric vehicle (EV) and energy storage sectors. Martin
noted that it is still a fairly small market today but one
that is growing rapidly and with a high degree of price
In mid-October, the LME said that it could launch its
lithium contract as early as the first half of next year,
depending on market readiness, to be cash-settled against
Fastmarkets’ price assessment for lithium
hydroxide monohydrate, min 56.5% LiOH.H2O, battery grade,
spot price, cif China, Japan & Korea.
A single contract can be used for hedging lithium exposure
across the value chain, Martin said, even though different
lithium grades and compounds are used according to consumer
certification. "Concentrating liquidity into a single
contract is always the right approach, especially in a fairly
nascent market as we have with lithium. If you look at the
price histories across the different markets of lithium then
almost invariably you find very high levels of price
correlation, so having a single lithium contract is almost
certainly going to be a fantastic proxy pricing mechanism for
anyone exposed up and down the value chain," Martin said.
Fastmarkets’ assessment for lithium carbonate
99.5% Li2CO3 min, battery grade, spot price cif China, Japan
& Korea stood at $6-7.50 per kg as of the October 22
assessment, down 32.5% from $9-11 per kg a year ago. The
lithium hydroxide monohydrate 56.5% LiOH.H2O min, battery
grade, spot price cif China, Japan & Korea is down 25% at
$8.50-9.50 per kg as of October 22 from $11-13 per kg a year
ago, according to Fastmarkets data.
Lithium use by battery manufacturers is subject to
certification processes and investments are made in
production processes built around particular specifications,
but that does not limit the use of flexible pricing or
development of risk management tools, Alex Harrison,
editorial and pricing director at Fastmarkets, added.
"The question about specification is one that exists in
every market… there’s a bit of a false
dichotomy in this debate on specialty product versus
commodity," Harrison said. "Clearly lithium is a specialized
commodity of sorts but all commodity markets require
specifications for their material – look at iron
ore, copper concentrate, manganese ore, primary aluminium.
Pricing in those markets isn’t determined solely
by the LME, but by the other elements that are in the
material by the impurities, the origin, the producer and so
on," he continued.
"There’s no suggestion that every kilogram of
lithium should change hands at exactly the same price. What
we’re looking at is prices that are
representative, carefully defined, [and that] buyers and
sellers can use whether there’s a premium or
discount with their own counterparty," Harrison added.
The lithium market is some time away from requiring
individual contracts to offset price risk in different
products along the value chain, delegates heard.
"Once you have a very mature market as we have with
primary aluminium, then it makes sense to offer things like
regional premium contracts, or a cash-settled alumina
contract. That gives participants the ability to manage their
price risk at a slightly more granular level, but typically
for those types of more niche products to be successful you
need some type of dislocation in the market. …I
certainly think in lithium we’re years away from
that," Martin said.