Lithium could reign in the short term, but it is unlikely to hit 2016-17 highs
Prices for lithium, a key metal in the electric vehicle (EV) sector, especially for batteries, are expected to remain high in the near term. However, this decision will not result in a significant spike from the highs seen in 2016 and 2017, a webinar on “Global Lithium Outlook” has been announced.
While the outlook for lithium prices is favorable, the use of the metal in electric vehicle batteries with various cathode chemistries will help isolate lithium demand from technological advancements. This will coincide with changing preferences for cathode chemistries, experts said during the “Key Topics for a Fast Growing and Fast-Moving Industry” perspective, hosted by Fitch Solutions Country Risk and Industry Research (FSCRIR).
During the webinar, senior FSCRIR analysts addressed various questions about the outlook for lithium, which has seen a price spike of 91% since the start of this year to 89,000 Chinese yuan (10.25 lakh) per tonne.
FSCRIR analysts told the webinar that current perceptions of over-development are unlikely to lead to an oversupply of lithium in the short term, as mine development takes several years between design and operationalization. . In addition, the growth in lithium consumption should exceed the current trend in supply. This is backed by strong government support in major economies to promote electric vehicles and large-scale energy storage systems that will more than keep up with supply, analysts said.
Hydrogen cell technology
The demand for lithium hydroxide will exceed that for lithium carbonate in the future, as it is the primary lithium chemical used in preferred battery cathodes. As hydrogen fuel cell technology develops, it would take another 10 years to thrive. In addition, it would take longer for hydrogen fuel cell (FCV) vehicles to pick up compared to electric vehicles, analysts said.
Hydrogen-powered FCVs will not pose a significant threat to lithium demand over the next decade due to the lack of supportive refueling networks. Fitch analysts, however, saw limited scope for alternative technologies to gain market share, at least until 2030.
Although lithium prices tend to increase over the next five years, battery prices will decrease in the coming years due to the increased economies of scale in the battery manufacturing segment, the increase in manufacturing efficiency and additional capacity.
‘Resource nationalism ‘
Strategic sourcing is a growing theme in the lithium industry and there is an increase in government intervention in the name of “resource nationalism”. This could increase further and would consist either in securing strategic material, or in stimulating national production or benefiting from it by increasing taxes or controls.
Interventions will take different forms, but almost all lithium-producing countries would be involved in measures such as support for battery production (Australia, United States and Canada), contract review and tax increases (Chile, Mexico and Argentina).
Developing country markets will try to reduce their dependence on China, which is likely to result in a significant shift in the entire electric vehicle battery value chain in the coming years, analysts said. .
FSCRIR analysts believe that although India has announced the discovery of lithium reserves in the Mandya district of Karnataka this year, actual mining, if it takes place, will take years. Exploratory work has also been carried out on the extraction of lithium from the brine deposits of Rajasthan and Gujarat, in addition to the mica belts of Odisha and Chhattisgarh.
Mandya’s total reserve was only 1,600 tonnes, indicating that India would continue to import lithium in the long term. They also highlighted the agreement signed by the new public sector company Khanij Bidesh India Ltd, with an Argentine company to jointly prospect for lithium in the Latin American nation with 17 million tons of lithium reserves.
Khanij Bidesh was established in 2019 as a joint venture between National Aluminum Company Ltd (Nalco), Hindustan Copper Ltd (HCL) and Mineral Exploration Company Ltd (MECL) to ensure a constant supply of critical and strategic minerals in the domestic market .
In the longer term, battery recycling will be a viable alternative to supplying mining lithium. In the near term, the growth of the battery recycling industry will continue to be constrained by cost and policy challenges.
At present, the recycling process has not been standardized to increase profitability and allow companies to make profit. Further technological advances will be needed over the next decade to make recycling a sustainable source of battery grade lithium.
Analysts said investments will continue in recycling research and development ahead of the surge in used batteries for electric vehicles.