Production cuts will rebalance the lithium market

Significance

The two-year inventory glut was expected to clear in early 2020, but automaker shutdowns due to COVID-19 have rippled through the lithium value chain. Miners have cut production and delayed capacity upgrades in response to lower prices. Yet there are signs of demand improving, led by electric vehicle (EV) sales in Europe.

Impacts

• Russia’s Uranium One plans to begin producing lithium (mostly from foreign ores) in 2023, aiming to have 10% of the global market by 2030.
• London Metal Exchange is working to develop reference pricing to offer lithium hedging services; this would facilitate more trading.
• Nascent lithium recycling business will take about a decade to capture waste streams profitably.
• Prices to make capital spending worthwhile stand at about USD12,000 per tonne for carbonate and USD15,000 for hydroxide projects.
• Speciality grade prices will recover first; long-range EVs use prized nickel-heavy batteries, favouring lithium hydroxide over carbonate.