Lithium carbonate prices peaked in November 2017 at US$25,800/t, though since then they have been under pressure. Having fallen through much of 2018 and the start of 2019, as of February 2019 carbonate prices stood at just US$11,500/t.
In 2017, prices had been propelled through successive multi year highs by strong demand from the lithium-ion battery industry set against a backdrop of uncertainty over future supply. This attracted significant attention on the lithium sector and incentivised investment into both mining and processing capacity. Prices for all lithium products subsequently fell as production at operations in China, Australia, Canada and Chile ramped-up, and as a swath of greenfield projects mitigated fears of future supply shortages.
During this period, China was a crucial factor in helping to move the market back towards equilibrium. The country is crucial to determining the outcome of the global market, and through our Shanghai office, Roskill maintains a permanent research presence in China to follow industry developments. Of particular note last year, Chinese battery grade lithium carbonate prices fell from US$21,700/t in Q2 to US$11,450/t in Q4, as increased production from domestic brine operations, albeit of poor-quality materials, alleviated tight supply in the Chinese market.
Longer term, the addition of capacity at existing and new operations will be critical to meet forecast demand growth over the coming decade, whether from lithium brine or lithium hard rock/mineral conversion operations. Demand for lithium is expected to increase five-fold over the coming decade, driven principally by demand for lithium-ion batteries and their use in electric vehicles, energy storage systems and portable electronics. Lithium demand is forecast to increase by over 20%py, with demand from battery applications increasing by over 25%py through to 2028. Meanwhile demand for lithium from industrial applications such as ceramics, greases and glass are also expected, albeit at a more modest rate of 2-3%py. With this backdrop the lithium industry will require significant investment in additional supply from new mines, process plants and from the nascent recycling industry.
Although new capacity has been brought online at several operations, there have also been a number of set-backs. Recently there have been capital expenditure blowouts, delays in mine ramp ups and the bear market in the lithium equities has undoubtedly curtailed investment in greenfield projects. These developmental challenges, along with the changing cost profile of the industry, highlight the technical and financial hurdles involved with bringing such sizable volumes of new capacity online. We maintain the view that concerns about future refined lithium over-supply are poorly founded and expect the lithium market to enter a period of sustained supply deficit in the early 2020s.
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