Spot lithium price up around 900% since January 2020

In July 2020, I interviewed RK Equity’s EV battery mineral experts for the first time. The main story was clear: there was a growing demand for electric vehicles, but not enough investment in the mining of electric vehicle battery minerals, and lithium mining in particular. The result was as predictable as you could get for an Econ 101 course: prices would go up, dramatically. In subsequent interviews with Rodney Hooper and Howard Klein of RK Equity, the story remained the same. I also interviewed Caspar Rawles, Head of Price Valuations at Benchmark Mineral Intelligence, in January 2021 and got essentially the same story. Sure enough, as demand grew rapidly, lithium prices soared.

Benchmark Mineral Intelligence gives us an update on its view of the market: “It’s been almost a year since lithium prices hit an inflection point at all-time highs and three months since a controversial Goldman Sachs research note predicted a tumble. prices on the increase in lithium supply.

“Yet Benchmark’s global average lithium prices have remained flat since April’s record highs, with Chinese technical and battery-grade lithium carbonate prices continuing to rise. This is in stark contrast to other battery metals such as cobalt and nickel, the prices of which have fallen this year.

“Since the beginning of June, prices of Chinese battery-grade lithium carbonate have increased slightly, but since the beginning of the year, prices of Chinese battery-grade lithium carbonate have increased by 90%, while lithium hydroxide increased by 127%.

This is all up to now. What about the future? Well, automakers’ needs and orders continue to grow rapidly, and they continue to compete over a less than adequate lithium production pipeline.

For now, the increase in supply and demand aligns quite closely. Benchmark predicts that lithium supply will increase by 33% this year, while demand is expected to increase by 36% to 610 GWh (gigawatt hours). More details on supply and demand factors in 2022 can be found here.

Taking into account the Inflation Reduction Act of 2022 and looking beyond, North American mineral requirements are increasing dramatically and rapidly. It also means some easing of Chinese demand for lithium, but there will still be a lot of demand for it from China, Europe, etc. But will the EV battery and mineral market be able to extract enough minerals from the ground and process them for US demand? without leading to totally inflated prices? Well, we’ll see.

“The industry faces a decade of perpetual change. A broader range of assets across a more diverse group of producing regions will be required to respond to the structural constraints facing the industry and the increased geopolitical emphasis placed on strategic supply chains,” said Andrew Miller, Director of operations at Benchmark.

Right now, all things considered, Benchmark predicts much more demand than supply from 2030 onwards and therefore further price increases. “The supply shortfall is expected to worsen from 2030 as demand increases by another million tonnes of LCE within a few years.”

Naturally, the above is based on projects and plans currently in place. Additional production plans that will come into play in the coming years could change things. That said, it takes several years to develop new battery ore mines and processing facilities. So, time is running out quickly to propose and plan electric vehicle battery mineral facilities to help production match supply through the end of this decade. Moreover, all of this is based in part on forecasts of consumer demand for electric vehicles. What if consumer demand is much higher (or lower) than expected?

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