Lithium Producers Talk Prices, Demand and Challenges

Attendees at this year’s Lithium Supply & Markets Conference, now running in Chile, had the opportunity on Tuesday (June 11) to hear insights from executives of top lithium producers SQM (NYSE:SQM), Tianqi Lithium (SZSE:002466) and Albemarle (NYSE:ALB).

To kick off a discussion of the space, Pablo Altimiras, vice president of SQM’s lithium and iodine business, shared his thoughts on the main changes the industry has faced due to the surge in demand for lithium from the electric vehicle sector.

He mentioned the speed of growth in the market, as well as changes in quality requirements for new applications, cathode chemistries and customer profiles as some of the key developments.

“We need to adapt — the key word here is we need to have flexibility to face these new challenges,” Altimiras said.

Albemarle Vice President of Corporate Strategy and Investor Relations David Ryan agreed that the lithium space has seen demand grow and evolve at a rapid pace.

“The change in the customer base from industrial applications to automotive applications also comes with a change in how the supply chain is viewed as well,” he said. Longer-term supply requirements are now altering historical customer dynamics.

For Tianqi Vice President of Corporate Development and Marketing Emma Hall, the change in customer needs is not only about scale, but also about the quality and sustainability of lithium production.

When the conversation turned to demand forecasts, everyone seemed to be on the same page: demand is going to increase significantly.

“I think everyone agrees on the strength of demand. The challenge really is how can the industry keep up with that demand, not only for the major players currently in the market but also new entrants,” Ryan said.

For SQM’s Altimiras, the demand is there, but with the uncertainties in terms of how new battery technologies and different chemistries will evolve, market participants need to consider multiple future scenarios, not just one.

“(Junior miners) cannot underestimate how difficult it is to produce lithium,” Altimiras said. “It is not so easy … to produce a product that is tailor made for different customers with different specifications.”

He added that the best way to address this is to invest a lot of time into learning and not trying to do projects in a rush.

“As a junior miner time is of the essence, but lithium is a specialty chemical, not a commodity. Take the time to understand the market and the customers — don’t rush,” Tianqi’s Hall said.

For Albemarle’s Ryan, understanding both customers and customers’ customers is critical.

“It is not only important to understand the quality and quantity that your customers need, but also by when, so we can time our developments and expansions to meet those needs,” Tianqi’s Hall added.

One of the biggest pieces of news in the space this week was the announcement that the London Metal Exchange will join forces with price reporting agency Fastmarkets to develop a lithium futures contract, and the top producers pointed to the challenges of its adoption in the industry.

“We view this market as a specialty chemicals market, with customized products and specifications, and that is how we approach the market and the long-term agreements with our customers,” Ryan said.

“For us, a price index goes against that strategy, a price index tends to support a commodity market, and that is not what we believe lithium is … (That’s why) Albemarle will not be providing price information to the index.”

Similarly, Altimiras said SQM sees lithium as a specialty chemical, not a commodity, with the qualification process for products taking several months.

“The challenge for the index is to have a very good representation of the market, which I feel it is not possible today because of how the lithium industry works.”

Tianqi’s Hall agreed that it would be challenging to have a price index that takes into account all the different customer dynamics.

“A price index could bring clarity to the market, but if it is not done right it could be misleading and harmful as well,” she added.

Click here to watch our full Lithium Supply & Markets Conference playlist on YouTube.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.