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Lithium to remain strong amid lack of new supply: LME Week Sustainability panel

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Lithium to remain strong amid lack of new supply: LME Week Sustainability panel

Highlights

Rising EV sales to boost lithium demand

$45 billion-$50 billion of investment required

Supply-demand mismatch to boost prices

Lithium prices were expected to remain strong in the coming decade due to strong growth in electric vehicle sales and it would remain a challenge for supply to catch up, according to the Oct. 14 LME Sustainability Morning panel on sustainable production of EV battery materials.

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Demand for lithium up to 2030, was expected to be primarily driven by rising global EV sales, with the penetration rate of 7% in 2021 due to rise to around 18% in 2025 and to 28%-30% by 2030, iLi Markets partner Daniel Jimenez told the panel.

According to S&P Global Platts Analytics, global plug-in light duty EV sales are expected to rise to 10.5 million units in 2025, up from 3.1 million units in 2020 and 6 million units in 2021. This will continue to climb to an estimated 21.7 million units by 2030.

Lithium demand growth, driven by electromobility, was expected to reach roughly 800,000-900,000 mt of lithium carbonate equivalent by 2025, up from a current market of 300,000 mt, Jimenez said.

"There is the quadrupling of demand in just five years and probably a growth of six or seven times over 10 years. So, clearly the industry is not prepared today for that level of demand - the amount of incremental capacity that the industry needs over the next 10 years is at least 1.5 million mt and in terms of capital investment, will probably require $45 billion-$50 billion of investment into new projects or expansions of existing operations," he said.

E3 metals Corp. CEO Chris Doornbos said he expected prices to fluctuate over the next decade, based on new supply coming on and new gigafactories being built.

In term of investments, Doornbos said that while it took a relatively short amount of time to build a gigafactory, it took much longer for the discovery of mineral resources and then the construction of producing assets.

"Looking at the timeframe to that, I think that investments are going to be required and significant investment to keep supply up with demand. It is actually a pretty big risk for the market itself," Doornbos said.

"To meet that demand, it will be difficult in one respect in that this is a quantum growth in terms of supply of installed capacity and we will have to rely not only on existing producers executing successful brownfield expansions, but also greenfield development, which they really have a bigger challenge," Jimenez said.

He said that although there was a large pipeline of projects, the question remained whether they would come online in time to catch up with the increased demand.

Supply-demand mismatch

The mismatch in demand and supply was likely to boost prices, which Jimenez said he did not believe would fall below $13,000/mt, which was the incentive price level to develop new, marginal, high-cost projects.

He said that, if the market's narrative remained the same as it was today, with demand exceeding supply, prices could go as high as $30,000-40,000/mt over the next decade, although he forecast the prices to be above $16,000-17,000/mt, saying that $20,000/mt would probably be the average level over the decade.

"This is a price where many resources that a few years ago nobody would have thought of developing, but they are now economically viable to develop and this will introduce a change to the industry," Jimenez said.

According to S&P Global Platts assessments, seaborne lithium carbonate prices were at $21,900/mt and lithium hydroxide at $22,100/mt, up 245% and 146%, respectively, since the start of the 2021.

Operating lithium producer Livent was trying to grow its operations in Argentina and globally, as more supply was necessary as the market changed, Livent director of Lithium Technical Center Dana Graves said.

"It is a very quality-driven market... and that adds a level of complexity. Not only do you have to discover a resource, but you have to run a specialty chemical operation on the back end of it," Graves said.

New types of resources being exploited, such as clays, low lithium bearing brines, hydrothermal brines, also posed new challenges, Jimenez said, due to the technology required, as well as the capital and cost.

"We will need other types of resources which have costs that are probably significantly higher, so we will also see prices go significantly higher with that," Jimenez said.

The overall the lithium market was expected to remain strong for the foreseeable future.

"It is going to be a very strong market for the lithium products, probably regardless of what you are making [lithium carbonate or lithium hydroxide] and then ... a stronger market for metals later one, maybe towards the end of the decade. So, it is strong and it is growing considerably," Doornbos said.