Albemarle, the world’s largest producer of lithium, He expects high prices for this key battery metal to remain in place for years, despite an increase in supply.
The lithium market declined between 2018 and 2020 as it was overwhelmed by excess supply and demand following subsidy cuts for electric vehicles. At that time, prices had fallen from over $25,000 a ton to less than $6,000 a ton, according to data from Benchmark Mineral Intelligence.
But Eric Norris, head of lithium for American Chemical Group, said that The market for the metal was fundamentally changed by the increasing growth in sales of electric vehicles.
Prices have increased more than 10 times since 2020, reaching a record high of around US$80,000 per tonne, a level they will be nearing through 2022, which This raises fears that automakers may struggle to secure lithium supplies for the rest of the decade.
“One of the reasons we see things so tight is that the market is fundamentally different,” Norris said in an interview. “In 2019, the market did not grow much and was 300,000 tonnes. The previous growth rate could have been 30,000 to 50,000 tonnes per year.
“Today the market is growing at 200,000 tonnes a year, almost the full size that the market was,” said Norris, who said the average size of a new supply project was 5,000 tonnes.
Albemarle is the world’s largest producer of lithium by market capitalization and is expected to extract between 130,000 and 140,000 equivalent tonnes of lithium carbonate this year from its assets in Chile, the US and Australia, with production to be processed in producing countries and China.
Its adjusted earnings before interest, taxes, depreciation and amortization is expected to quadruple this year, to between $3.3bn and $3.5bn due to higher prices.
The company’s comments come at a time when lithium market analysts are debating whether lithium is a commodity with booms and busts like any other, Or if it faces indefinite structural shortfalls as a nascent industry contends with the rise of electric vehicles. Lower battery metal prices are critical to making electric vehicles affordable to consumers.
Goldman Sachs expects prices to recover sharply to the equivalent of $11,000 per tonne of lithium carbonate in 2024, as China’s electric vehicle sector gluts cars and higher lithium prices fuel growth. Development of new sources of supply in Chile, Australia and China.
According to Fastmarkets NewGen analysis, there are nearly 40 lithium projects under development or have completed definitive feasibility studies globally, a 166% increase over 2019.
Lithium analysts say the cost of new supply is higher as new projects develop lower grades, which will prevent prices from falling below $20,000 a tonne.
The Australian government said this month it expected prices to drop to an average of around $48,000 per tonne of lithium hydroxide, another battery-grade lithium chemical, in 2024.
Canberra also echoed industry concerns that new projects being developed by smaller mining companies were at risk of being delayed, leading to a “persistent supply shortfall for years to come”.
But he said storage by lithium refiners and battery makers was an unknown factor that could push prices down faster than anticipated.