LFP battery resurgence alters price dynamics

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Published: Wednesday, 14 April 2021

Changing preferences for lithium-ion battery chemistries in China have altered relative lithium prices, Susan Zou and Carrie Shi report.

The strong resurgence in the use of lithium iron phosphate (LFP) batteries in electric vehicles (EVs) produced by automotive manufacturers in China since 2020 has resulted in the rapid growth in demand for technical-grade lithium carbonate – altering the traditional price dynamics in lithium salts in both the domestic Chinese and seaborne Asian markets.
 
China’s technical-grade and battery-grade lithium carbonate prices have both been on an upward trend after bottoming out in the second half of 2020 amid robust demand from the battery supply chain, and the upturns accelerated at the start of this year, with the price gap between the two grades narrowing considerably in February.
 
Technical-grade lithium carbonate is typically used to produce LFP batteries, while battery-grade lithium carbonate is mostly used to produce cobalt-rich nickel-cobalt-manganese (NCM) lithium-ion batteries – including NCM111 (Ni:Co:Mn: 1:1:1), NCM523 and NCM622 batteries. The nickel-rich NCM811 battery is produced using battery-grade lithium hydroxide. 
 
Fastmarkets assessed the Chinese technical and industrial-grade lithium carbonate spot price at 79,000-81,000 yuan ($12,134-12,441) per tonne on Thursday March 18, up by 150% from 30,000-34,000 yuan per tonne between late June and early July 2020 – when the price plunged to its lowest level of the past year. 
And Fastmarkets’ weekly price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 85,000-90,000 yuan per tonne on March 18, up by 124% from 37,000-41,000 yuan per tonne between early July and early October last year.
 
Technical-grade lithium carbonate was mostly trading at a discount of 7,500-8,500 yuan per tonne against battery-grade lithium carbonate in the first half of 2020 in the domestic Chinese market. Since mid-2020, the discount mostly hovered around 5,500-6,500 yuan per tonne, before hitting a low of 2,000 yuan per tonne in mid-February, according to Fastmarkets’ data. 
 
"The elevated technical-grade lithium carbonate [price] underlines the stockpiling drives among consumers who are anticipating increased demand for LFP batteries. Meanwhile, squeezed supplies have prompted lithium producers to keep raising their offers, some of which are increasingly closer to the level for battery-grade materials," a producer said. 
 
LFP batteries are one of the earliest well-developed EV battery technologies in China and are well known for their stable and safe performance. They had been widely used in various types of EVs as a result, but in the second half of last decade, faced with appealing government incentives, most original equipment manufacturers (OEMs) in the country switched to NCM lithium-ion batteries, particularly pure EVs, because their higher energy density ensures a longer driving range per single charge. 
 
But the OEMs’ willingness to use NCM lithium-ion batteries – especially for nickel-rich NCM811, which generates the highest energy density among all NCM batteries – has recently been tempered by fast-rising cobalt and nickel prices this year, amid tight availability and just as subsidies are being phased out. 
 
Prices for cobalt sulfate and nickel sulfate, two key raw materials to produce NCM lithium-ion batteries, were up by 43.86% and 13.11% respectively as of March 19, despite some recent retreats, according to Fastmarkets’ data. 
 
China produced 9.56 gigawatt hours (GWh) of LFP battery power in the first two months of 2021, accounting for 44.3% of the total battery output and up by 624.2% compared with the same period in 2020. NCM battery power was 12 GWh over the same period, accounting for 55.7% of the total and up by 385.1% from January-February 2020, according to the latest data released by the China Association of Automobile Manufacturers (CAAM).
 
A precursor materials producer told Fastmarkets that LFP batteries are likely to account for half of the market share over the course of 2021. Additionally, the slower pace of adoption of nickel-rich NCM batteries among OEMs has resulted in battery-grade lithium carbonate trading at a premium above hydroxide in China since early December last year – as opposed to the discount seen in the previous two to three years.

Seaborne Asian market 

The seaborne Asian market is mirroring the trend in the Chinese domestic market, with the price gap between battery-grade and technical-grade carbonate also narrowing significantly.

Technical-grade lithium carbonate was mostly traded at a discount of $1.25-2.35 per kg against battery-grade lithium carbonate at spot cif China, Japan and South Korea basis in the second half of 2020, while the discount has been $0.25-0.75 per kg most of the time so far this year, according to Fastmarkets’ data.

In addition, the seaborne Asian market also witnessed a narrowing gap between battery-grade lithium hydroxide and carbonate, which has more actively responded to the rally in China so far this year. Battery-grade lithium carbonate was trading at a discount of $2.15-2.25 per kg against the equivalent grade of lithium hydroxide, but the gap has narrowed to $1.25-1.75 per kg so far this year, Fastmarkets’ data shows.

"The South Korean and Japanese lithium import markets are trying to keep in alignment with the China, but so far prices are comparatively more aligned in the carbonate market," a Japanese trader said.

The battery-grade lithium carbonate price in the seaborne Asian market has risen by nearly 52% so far this year, while the equivalent-grade hydroxide price has gained about 28%, according to Fastmarkets’ data.

 2 lithium graphs_pgs50-51  

Lithium miners strengthen sustainability commitments

With demand for lithium continuing to recover in the wake of the Covid-19 pandemic, Chile’s Sociedad Quimica y Minera (SQM) and other major lithium miners have announced plans to expand production while highlighting their commitments to sustainable lithium extraction.

SQM recently announced that it was the first lithium mining company to join the Initiative for Responsible Mining Assurance (IRMA), while committing to expand its capacity for lithium carbonate production in 2021 to 120,000 tonnes per year and to 180,000 tpy by 2023. This compared with output of 70,000 tonnes in 2020.

The producer was joined by a string of other major and junior miners that have pledged to reduce the carbon footprints of their operations in line with increasingly stringent requirements from automotive manufacturers. Lithium is a key ingredient in the manufacture of batteries for electric vehicles (EVs) and for energy storage systems, and lithium demand for both uses was expected to soar in the coming years.

Argentina, Chile and Bolivia form the so-called lithium triangle that holds more than 70% of the world’s reserves of lithium underneath salt flats. Australia is another important source, where it is extracted via hard-rock mining.

In February, United States-based lithium producer Livent announced its new sustainability goals, which it said will lead to carbon neutrality by 2040. This will be achieved partly by the use of 100% renewable energy, it said. Livent has begun the relevant certification process for its operations in Argentina under IRMA.

"IRMA provides a credible solution for the growing demand for more socially and environmentally responsible mining standards," Livent president and CEO Paul Graves said. "Many of the leading automotive [original equipment manufacturers (OEMs)], including BMW, Mercedes and most recently Ford, have publicly announced their intention to accelerate the adoption of the IRMA standard across their supply chains."

The use of renewable energy throughout its operations has been highlighted by Canada-based junior miner Sigma Lithium. The company is developing a hard-rock-based lithium production plant in Brazil. This will be the first spodumene-based lithium mine in South America. According to the company, production is scheduled to start in the first quarter of 2021.

Lithium hard-rock miners in Western Australia are also increasing their sustainability commitments. Asked how Pilbara Minerals will track the sustainability of its operations, chief executive officer Ken Brinsden said: "We are very conscious of the need to both track the carbon footprint and reduce emissions in respect of our business activities."

"There are lots of opportunities in mines and services to reduce emissions," he added. "The Pilbara [area] hosts some of the world’s greatest renewable resources in the form of solar radiation and wind. We look forward to being able to demonstrate our ability to capture these resources and materially lower the carbon footprint of our operations."

Fastmarkets’ assessment of the lithium hydroxide monohydrate, 56.5% LiOH.H2O min, battery grade, spot price, cif China, Japan & Korea, was $10-11 per kg on March 4 this year. This compared with $9.50-11.00 per kg on March 12, 2020. The Asian spot price for battery-grade lithium hydroxide has gone up. Increasingly higher prices have been heard in the market, with China’s domestic price progressively rising since the end of 2020 on demand recovery and tight spot supply.