Battery Metals

Lithium Investing

Lithium processors are positioning themselves to meet growing demand for battery-grade lithium compounds in the wake of the electric car revolution.

As the electric car revolution unfolds, demand for lithium-ion batteries is expected to soar. The need for battery-grade lithium compounds will also surge, but will lithium producers be able to keep up with increasing demand?
Most analysts agree that the world is not short on lithium. However, producing lithium for use in batteries can be a challenge for miners. For that reason, top lithium companies are now agreeing to long-term contracts with their customers to ensure they have enough funding to meet future demand levels.
“We’ve established the timeline for our own expansion based on the commitments our customers are making with us,” said Tom Schneberger, global business director at FMC Lithium (NYSE:FMC). “Our first priority will be to provide the adequate supply of the high quality products upon which [our strategic customers] rely,” he told Reuters.

Other major lithium producers, such as SQM (NYSE:SQM), are also betting on long-term agreements to fund their expansion plans. The company expects to invest $50 million to expand its lithium carbonate capacity in Chile to 63,000 tonnes by 2018; that would be up from 48,000 tonnes currently.

Battery-grade lithium demand set to jump

Demand for lithium-ion batteries from the electric car sector is set to rise above 400 GWh by 2025, according to Benchmark Mineral Intelligence. As a result, most analysts expect global lithium output to reach 400,000 to 500,000 tonnes by the same year.
But bringing projects into the market can take years, as processing battery-grade lithium can take anywhere from three years to seven years or more, depending on the project. That’s why many analysts predict a tight market in the next few years.
“It is our expectation that the lithium industry will struggle to keep up with demand between now and 2021. [We don’t expect an] oversupply [in the market],” said Benchmark Mineral Intelligence Managing Director Simon Moores.
Indeed, Roskill estimates that 785,000 tonnes of lithium carbonate equivalent a year will be needed by 2025, amounting to a 26,000-tonne shortfall from anticipated supply. That’s compared to 217,000 tonnes of demand versus 227,000 tonnes of supply this year.
“When you look at all the battery plants being built and the plans for EVs, even if only about 25 percent of those are realized, we’re still going to be short of lithium. It’s a unique once-in-a-generation situation,” Moores added.
Moores’ firm predicts that lithium carbonate prices will average $13,000 a ton over the 2017-to-2020 period from around $9,000 a ton in 2015 to 2016. Lithium hydroxide is expected to average $18,000 a ton between 2017 and 2020 against $14,000 from 2015 to 2016.

Click here to read our Q2 lithium market update and to learn more about key developments in the space.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.


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