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China has made no secret of its ambitions to develop electric vehicles on a grand scale while Australia produces over half of the global output of lithium carbonate equivalent (LCE), according to S&P Global Market Intelligence. Lithium is considered irreplaceable in the batteries required to run electric vehicles.

It was China's steel production boom and Australia's iron ore mine expansion that have defined the steel industry over the last decade. Some believe the comparisons with China's EV ambitions and Australia's raw material supply stop there. Others who gathered Tuesday and Wednesday at S&P Global Platts inaugural Battery Metals conference in Brooklyn believed it was worth a further look.

Most of the currently available lithium in the global market comes from spodumene deposits that are prevalent in Western Australia.

"I do see some parallels between Western Australia selling spodumene to China and selling iron ore to China," Howard Klein of RK Equity said. "There is some risk. However the iron ore boom that lasted ten years, ended up busting because you had very credible suppliers bringing on huge amounts of volume. You cannot have oversupply without over investment. You had overinvestment with iron ore but you are not seeing that with lithium."

The nascent electric vehicle market has made it difficult for firms to find significant liquidity in futures market for products like lithium. Panelists believed this was one headwind holding back investment into more lithium projects.

"Right now there is no effective way to hedge," Mustafa Hafeez, director of Deutsche Bank Securities said of lithium investment. "Who is going to finance it?"

There is also the drastic pricing difference. S&P Global Platts assessed lithium carbonate and lithium hydroxide at $14,500/mt and $18,000/mt, respectively, both on a CIF North Asia basis. On Wednesday, Platts 62% Fe CFR North China IODEX was $74.25/dry mt.

"Lithium is a special product," David Deak, Ph.D., an independent lithium expert said. "Lithium hydroxide, you cannot treat as a commodity. It does not have a shelf life. It is not iron ore."

Patrick Schaufuss, associate partner of McKinsey & Company, estimated that by 2028, Asia would have more than 60% of electric vehicle battery manufacturing capacity, mostly driven by China.

"China is the driver, just as they were with iron ore," Jerko Zuvela, managing director of Argosy Minerals, said while noting that unlike how China had to import high-quality iron ore from independent miners, the country has already invested around the world via acquisitions and joint ventures to capture some lithium supply.

Aside from a possible lithium oversupply, another question that China faces is over its some ability to ship locally-produced electric vehicles around the world as it has done with steel if it manages to ramp up its imports of lithium to produce batteries for those vehicles.

"Just because the Chinese may build very good electric cars, I don't think that means they will conquer the US market in a few years," Schaufuss said.

--Nicholas Tolomeo, nicholas.tolomeo@spglobal.com

--Edited by Pankti Mehta, pankti.mehta1@spglobal.com