Lithium 2016: Demand on the rise
By Myles McCormick
Published: Friday, 27 May 2016
The continued growth in the need for lithium was a given at the 8th Lithium Supply and Markets conference in Las Vegas this week. The availability of supply in the near term remains less of a certainty, however.
Lithium demand is expected to continue to grow at a considerable rate in the coming years, though what will happen on the supply side remains unclear.
Delegates at the 8th Lithium Supply and Markets conference in Las Vegas, US this week heard that incremental increases in demand of around 20,000 tpa over the next five years is expected, requiring one new full capacity project to be brought online each year to balance the market.
"The beauty of our business is that if you go and do the legwork, you can work out a model of what the future holds," said Anthony Tse, CEO of Galaxy Resources Ltd, who predicted a 20-30% supply gap in lithium in the coming years.
Doubts were raised over the ability of the market to keep pace with the growth in supply, with many questioning FMC’s potential to triple its lithium hydroxide capacity, as announced earlier this week, and the expansion of Albemarle’s operations in Chile still being met with scepticism.
Against this background of strong demand growth coupled with uncertain supply levels, the discrepancies in price predictions were sizeable.
Speaking during a panel discussion, Joe Lowry of Global Lithium LLC predicted "low teens to mid teens pricing going forward" (at a range of $11-14/kg for lithium carbonate in the medium term); John Kansellitas of Lithium Americas Corp. said his company was modelling itself on prices settling at $7,500/tonne; Luis Suarez of Chile-based Li3 Energy Inc. said the company had always used a model of $5,000/tonne; while Jon Hykawy of Stormcrow Capital Ltd reckoned prices should decline back to "four digit levels" before long.
Following recent spikes, IM is currently tracking Q2 lithium contracts at levels of $15-20/kg for lithium carbonate (large quarterly contracts, min. 99-99.5% Li2CO3, del. US) and $14-20/kg for lithium hydroxide (large quarterly contracts, 56.5-57.5%, packed in drums or bags, del. Europe or US).
But with demand growth all but guaranteed, the key determinant in future prices will be the success or otherwise of new supply coming online.
The continued ramp up of Orocobre’s Olaroz project in Jujuy, Argentina along with shipments beginning from Galaxy’s Mt Cattlin project and the Mt Marion project under Neometals and its partners, both in Western Australia, should ease the supply situation a little.
However, Lowry predicted a five-to-seven year period before supply meets demand in the market, while Galaxy’s Tse emphasised that "it’s a multi-year commitment to get a project online (…) from prefeasibility stage through to steady state production".
And with demand booming and price rising, investors are rushing to fill the gap. Dozens of junior miners present at the conference made individual pitches as to why their companies would be the ones to provide the answer.
But delegates remained weary of the marketing spin.
"80% of these guys will fail," one observer told IM.
Another wondered "who are they [the juniors] trying to impress" with what he saw as exaggerations and spin in their presentations.
However, with excitement around lithium-ion-powered (Li-ion) electric vehicles (EVs) booming, prices continue to track upwards. The market will await new entrants with a keen interest, as the battery technology seems set to retain its dominant position.
"Lithium-ion has already developed so much in terms of performance and scale advantages. If another technology can come in and challenge it, good luck," said Stormcrow’s Hykawy.
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