Lithium prices have fallen in recent months, offering respite to lubricating grease producers who had been squeezed by a run-up triggered by the popularization of electric vehicles.
Lithium is a key ingredient for the grease industry since approximately three-quarters of grease produced globally contains simple lithium soap or lithium complex thickeners. The decline in lithium prices is due to a significant increase in supply volumes, but one analyst predicts the prices will increase as soon as demand catches up with supply.
Prices have fallen as a number of new hard rock lithium mines have started production in Western Australia in a short period of time. In 2016 there were three hard rock lithium mines in the region, but the number ballooned to seven recently and more are expected in the near future. This has placed a record amount of spodumene concentrate – the precursor raw material for lithium carbonate and lithium hydroxide – on the market, said Chris Berry, president of House Mountain Partners, a New York City firm focusing on Energy Metals supply chains including lithium, cobalt, graphite, vanadium, and rare earths.
Additionally, Chinese lithium brine producers flooded the market with low quality brine in 2018 pushing down the China price – the lithium price inside China that is typically lower than the non-China price – dragging the rest of the world with it.
Essentially, people got seduced by high lithium pricing, and reality has set in as we revert to the mean, said Berry.
At its peak, spodumene was trading for $900 to $1,000 per metric ton, but the sales price has now fallen to $540/t. There has been a less significant increase in brine-based lithium supply out of Chile and Argentina that also aided in pushing prices down. Berry said it’s important to remember that while prices for lithium derivatives have fallen, they remain well above historic averages. Prices rose in recent years due to steep increases in demand from lithium-ion batteries in electric vehicles.
“I wouldn’t be at all surprised to see it fall lower, but it would likely only end up being a temporary event,” he said. “With lithium demand growing at a compound annual rate of around 18 percent to 2025 and significant difficulties involved with bringing battery grade lithium chemicals to market at scale, we are likely at or close to the bottom here.
“I see the lithium market going sideways into 2021 and then a long-term price of around $10,000 to around $11,000 per ton for select lithium chemicals based on demands from electrification,” Berry said. “Lithium has always been an oligopoly with a few players dictating tonnages and pricing. I expect that to continue into the future as supply chain knowledge is relatively limited.”
For industries using lithium, from electric vehicle battery makers to grease manufactures, Berry sees stricter specifications driving up prices. “End users of lithium are going to continue to tighten their specifications for lithium quality,” he said. “This will make it tougher – but not impossible – for lithium producers to meet spec at scale. This is the genesis for a new round of higher lithium pricing in the future.”
“When that new round of higher prices will come is anyone guess,” said Berry.