You can’t have too much lithium

As we mentioned earlier this month,[1] analysts did not anticipate a substantial rise in lithium-ion battery (LIB) prices in 2022, which were projected to grow only 2% YoY. However, more recent estimates suggest that growth may be higher than expected in June. According to a survey released by BloombergNEF[2] in early December, LIB prices have climbed 7% from last year to $151/kWh amid soaring costs (see Fig. 1).

Indeed, lithium, a key component in batteries, hit a new high of $84,500 per tonne in mid-November, while its average price this year stood at $71,600 per tonne (see Fig. 2), up 279% and 1,023% from 2021 and 2020, respectively.

Lithium prices depend largely on the situation in China as a dominant player in terms of both supply and demand, holding 7.9% of the world’s lithium reserves[3] and some 60% of processing and refining capacity[4]. At the same time, local carmakers are starkly short of batteries, with their output rising only 1.1% YoY (see Fig. 3).[5] Though demand for batteries and components is outpacing supply, manufacturers are struggling, as they rely on increasingly expensive feedstock sourced from Chile, Australia and Argentina.[6]

Some experts claim that lithium prices will stay high throughout the whole of next year and may only ease in 2024 as more extraction and refining capacity comes online.[7] By contrast, a major Chinese carmaker expects the tight lithium market to swing back into surplus as early as in 2023,[8] despite surging demand observed in the past few years, while Benchmark Mineral Intelligence forecasts supply at nearly 863,000 tonnes, up 36% from this year, with the deficit narrowing to 5,000 tonnes from the current 80,000 tonnes.[9]

By the looks of it, there’ll be enough lithium in the near future, though it’s not clear for how long as transition to e-mobility gains momentum, while capital spending on new mining projects is anticipated to fall.