Continued supply tightness and buoyant demand in the lithium supply chain pushed prices for spodumene and lithium salts to record highs in late 2021, boosting investments in capacity expansions and new production projects. This is likely to ease supply tightness, particularly in the second half of 2022 as output ramps up.
Lithium demand has seen rapid growth during the global transformation to a low-carbon economy, despite the ongoing Covid-19 pandemic. At the same time, 5G telecommunications has expanded after commercial production of 5G phones started in 2020, further fuelling demand.
Lithium consumption on the rise
The biggest driver for lithium consumption comes from the new energy vehicles (NEV) sector, as the world's biggest economies commit to reducing carbon emissions by mid-century. Lithium is widely used in the production of lithium-ion batteries, which are used to power NEVs and also have applications in the computer, communication and consumer electronic (3C), ceramics, glass, lubricants and refrigeration liquids sectors.
The pace of electrification in the global automotive industry is accelerating, supported by various governments continuing to accelerate the adoption of electric mobility and stimulate consumer demand by providing subsidies and other supportive measures.
China has been accelerating its development of NEVs to achieve its target of hitting peak carbon dioxide emissions by 2030 and carbon neutrality by 2060, while eyeing a 20pc and 40pc share of NEVs in the country's total vehicle sales by 2025 and 2030, respectively. The EU is on target to reduce carbon emissions to net zero by 2050, while the US president Joe Biden's administration has also set a voluntary goal for half of all cars and trucks sold in the US by 2030 to be electric, plug-in hybrids or fuel cell vehicles.
NEV sales globally are forecast to exceed 5.5mn and 8mn in 2021 and 2022, including over 3.4mn and 5mn in China, respectively, according to market participants, which is expected to boost lithium demand by 180,000t from 450,000t in 2021 to 630,000t this year.
Record-high prices spur capacity expansions
This growing demand amid tight lithium supply has spurred spodumene and salts prices to hit all-time highs, spurring investments to increase global capacity.
Prices for 99.5pc grade carbonate rose to Yn215,000-225,000/t ($33,714-35,283/t) ex-works in China on December 9, the highest since
Argus launched the assessment in 2016, having risen by 336pc since the start of 2021. Contract spodumene prices moved above $1,600/dry metric tonne (dmt) in the fourth quarter of 2021 from under $600/dmt in the first quarter of last year.
Australian spodumene producer Pilbara Minerals drew a record-high price of $2,350/dmt for 10,000dmt of spodumene grading 5.5pc lithium oxide on a fob Port Hedland basis at its third online auction in October, up from $2,240/dmt at its second online auction in September and $1,250/dmt at its first online auction in July.
Global supply is poised to increase by 220,000t of lithium carbonate equivalent to 660,000t this year, from 430,000t in 2021, according to some market participants, with the increments largely because of mine expansions at SQM in Chile, Albemarle's La Negra III and IV in Chile, Talison Lithium's Greenbushes and Pilbara Minerals' Pilgan plant in Australia and Orocobre's Olaroz facility in Argentina.
Accounting for project ramp-up times, these additional supplies will help ease supply shortages from the second half of 2022, market participants said.
Start-ups are also targeted for next year, including Lithium Americas' Cauchari-Olarzoz in Argentina, Pilbara's Ngungaju plant in Australia, Yahua Lithium's Lijiagou project in China and Core Lithium's Finniss Lithium Project, also in Australia.
More projects are gaining ground, including Jiangxi Ganfeng and Firefinch's Goulamina project in Mali and AVZ Minerals' Manono spodumene project in the Democratic Republic of Congo, which are expected to come on line in the next several years.
Lithium carbonate prices in China CNY/t
Lithium supply from major producers kt of LCE
(20min delay)