In 2018, lithium prices developed quite differently than most people had predicted: they fell although demand continued to rise. The reason was the fear of oversupply. According to Benchmark Mineral Intelligence, the capacity of global lithium-ion battery production has reached over 1 TWh in the past year, driven by the many new electric cars that manufacturers want to build, according to Investing News.
According to Roskill analysts, lithium demand will grow by over 21 percent per year between 2018 and 2025. The penetration of electric cars would reach 15 percent by 2025, and 2 percent by 2018. According to senior analyst Andrew Miller, however, the demand will not really start until 2020/21. This year, he predicts a price increase of 13.5 percent.
David Merriman, Division Manager at Roskill, expects supply and demand in the lithium market to remain balanced until 2021. After that, however, demand may well outstrip supply because of a lack of financing to increase the production capacity. Because new capacity was built in 2018 and is now pushing to market in 2019, William Adams, Head of Research at Fastmarkets, expects lithium prices to remain stable this year. According to Andrew Miller, much depends on how quickly the ore production is ramped up, which is now being ramped up, and how much can be converted into the carbonate and hydroxide that is required by the battery.
Currently, 66 percent of the lithium is extracted from salt lakes. However, it also occurs in pegmatites, where it is called "hard rock lithium". The ore is mined using conventional techniques. Although extraction is more expensive than from salt lakes, the ores contain more lithium and other metals such as tin and tantalum are also extracted in parallel. In addition, lithium that can be used for batteries can be processed more quickly than from brine, where the processing time can take up to twelve months. There are deposits in Australia, for example. 8 percent of the lithium currently comes from sediments. Here, Rio Tinto has secured access to a deposit in Serbia, the IM Jadar Valley, which is estimated at over 100 million tonnes and is thus one of the largest lithium deposits in the world. Commercial production could begin in 2023.
Despite the growing demand, the companies that produce and process lithium for the batteries did not benefit from this in 2018. Investors were reluctant to invest, with the result that the shares of companies that produce lithium and other metals required for batteries fell significantly. Investors apparently feared that overcapacities could form. However, according to Andrew Miller of Benchmark, new capacities were added in 2018, but there was no sign of a lithium glut, which Morgan Stanley feared at the beginning of 2018. Nevertheless, according to Morgan Stanley's analysis, investors were very cautious about lithium last year.
The fact that the price of lithium then fell more sharply than many analysts had expected at the beginning of 2018 is mainly attributable to the special developments in China. However, it is a mistake to always look only at the Chinese market. On the other hand, new capacities were not added as quickly as many thought, so that prices did not fall below the 2015 level. Benchmark Mineral Intelligence expects that battery manufacturers will need a lot of nickel, cobalt, and magnesium for cathodes in the future. 44 percent of the large battery plants would use these metals by 2028 - 534,000 t would be required.