Despite the trend toward transportation electrification, the lithium industry has had a rough few years. In its new Lithium Outlook to 2030 report, Roskill notes that the prolonged downward trend for lithium compound and mineral concentrate prices has caused a difficult environment for many lithium producers since 2018.
In 2019, monthly average lithium carbonate prices fell 36% between January and December. Q1 2020 saw monthly average prices fall further to less than US$7,000/t Li2CO3 for the first time since 2014, eroding price increases caused by forecast strong demand growth in the lithium-ion battery industry and uncertainty over future supply.
In 2019, rechargeable batteries accounted for 54% of total lithium demand, almost entirely from Li-ion battery technologies. Though the rapid rise of hybrid and electric vehicle sales brought attention to the requirement for lithium compounds, falling sales in H2 2019 in China, the largest market for EVs, and a global reduction in sales caused by lockdowns related to the COVID-19 pandemic in H1 2020 halted lithium demand growth, impacting demand from both battery and industrial applications.
Lithium demand by application in 2019. Source: Roskill
Prices continued to slide in Q3 2020, with China spot prices falling below US$5,000/t CIF (Cost, Insurance, and Freight) for battery-grade lithium carbonate; contract prices edged closer to US$10,000/t CIF. The continued decline has led to many lithium producers operating at below or close to marginal cost of production. As a result, Roskill expects lithium spot prices to remain flat or show marginal recovery into Q4 2020.
However, Roskill believes that the closure of Altura Mining, the latest casualty of the period of falling lithium prices, may represent a turning point for the lithium industry.
The reduction in spodumene production and increasing consumer attention to supply security presents opportunities for price increases, though the large volumes of inventory held by mineral converters will need to be reduced prior to any material increase in spodumene concentrate prices.
In Q4 2020, there is growing uncertainty surrounding the ownership of Tianqi Lithium and their lithium mining and refining operations, with the potential to cause significant disruption or changes to expansion plans at key operations, Roskill noted.
In any case, the underlying demand growth for lithium compounds remains strong, with demand from rechargeable battery applications forecast to exceed 220kt LCE in 2020, representing roughly 70% of total lithium demand.
Forecast growth in Li-ion battery demand from EV applications continues to be strengthened with major markets targeting an earlier transition to xEV-only sales, in order to reduce emissions from transport.
The transition to 5G technologies also creates opportunities for rapid growth in battery demand, not directly from portable electronics but their supporting infrastructure, though Li-ion technologies are expected to see greater competition from other battery technologies in these applications.
As battery applications extend their dominance of lithium demand, Roskill expects the market to become more focussed on providing products to meet specifications for automotive batteries. The shift towards high-nickel cathode materials to increase battery energy density is accelerating demand growth for lithium hydroxide, although its cost premium over lithium carbonate has made some consumers reluctant to switch feedstock.
Roskill expects lithium hydroxide to become the dominant lithium chemistry consumed, though the balance between lithium carbonate and lithium hydroxide remains highly dependent on lithium-ion cathode requirements.
Roskill’s longer term scenarios show strong growth for lithium demand over the coming decade; Roskill forecasts demand to exceed 1.0Mt LCE in 2027, with growth in excess of 18% per year to 2030.