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Global lithium industry at turning point as EV shift spurs greater demand: Livent

Highlights

High prices spurring urgency on contracts

Livent to move forward with expansion plans

Pittsburgh — The lithium industry is at a real, fundamental turning point, with an increased sense of urgency among existing and potential customers on contact pricing for 2022, Livent CEO Paul Graves said during the company's first quarter conference call.

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"The signs of increasingly positive lithium market dynamics that emerged late in the fourth quarter of last year have continued so far in 2021," Graves said during the company's Q1 earnings call late May 3. "It is clear that the largest driver of this is much higher than expected demand for lithium, driven by strong actual and even stronger forecasted EV sales."

Graves said current published lithium carbonate prices in China have effectively doubled from the same point in 2020.

S&P Global Platts assessed battery-grade lithium carbonate on May 4 at Yuan 87,000/mt ($13,452/mt) and lithium hydroxide at Yuan 84,500/mt on a DDP China basis. By comparison, Platts battery grade lithium carbonate assessment stood at Yuan 44,300 ($6,272)/mt April 30, 2020, while lithium hydroxide was assessed at Yuan 52,500/mt.

An increase in spodumene prices is also having an effect on non-integrated producers, placing upward pressure on costs for conversion operations, Graves said.

"Given these higher cost pressures, we are starting to see some lithium supply contracts being strained with multiyear agreements with limited or no price flexibility quickly becoming unprofitable for these nonintegrated converters," he said. "With little to no surplus carbonate or hydroxide available in the market today, we expect that many of these contracts will come under pressure to be renegotiated in the coming quarters."

EV demand in the first quarter of 2021 was strong in all three major regions, with EV sales in March up around 100% month on month in China and Europe and up 70% in the US, he said.

"Responding to this strong data and supported by increasing EV sales forecast by [original equipment manufacturers], battery supply chains have accelerated their activity in the last few months, reflecting a confidence that these demand trends for EVs will continue," Graves said. "This is a stark difference from most of last year when COVID-19-related uncertainty drove many purchases to delay orders and avoid building any potential excess inventory."

While there have been some meaningful disruptions in the broader battery supply chain -- especially with regard to availability of shipping containers and restrictions around movement of people, goods and materials in some key geographies -- Graves said Livent has not seen EV production itself slowdown in the same way it has for many traditional internal combustion engine models.

"It certainly appears that OEMs are prioritizing successful EV launches when they are otherwise constrained driven by factors that include emission regulations, a desire for first-mover advantage and increasingly consumer preferences," he said.

Amid the increased demand, Livent has resumed previously paused capacity expansion plans in the US and Argentina, completing a 5,000 mt hydroxide addition in Bessemer City, North Carolina, as well as its phase 1 carbonate expansion of 10,000 mt in Argentina, it said May 3. The projects, which were paused in March 2020 shortly after the onset of the coronavirus pandemic, are now expected to reach commercial production by Q3 2022 and Q1 2023, respectively.

By the end of 2023, Livent plans to roughly double its carbonate capacity in Argentina from current levels to 40,000 mt, Graves said. Based on the current plans, once these expansions are complete, Livent will have a surplus of about 14,000 mt of carbonate, he said.

"This is important for two reasons: First, it eliminates the need to source third-party carbonate to feed our hydroxide units, which will increase our profit margins in lithium hydroxide," he said. "Second, it gives us the flexibility to participate in the growing carbonate market or to provide additional feedstock for further hydroxide expansion should our customers need it."

Livent reported a net loss of $800,000 on revenue of $91.7 million in Q1. By comparison, the company reported a net loss of $1.9 million on revenue of $68.5 million in Q1 2020.