Lithium supply to outweigh demand by 2018, cobalt to remain tight: CRU

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Lithium supply to outweigh demand by 2018, cobalt to remain tight: CRU

 

Dublin (Platts)–26 Apr 2017 952 am EDT/1352 GMT

Lithium supply was expected to outweigh demand as early as next year, UK-based consultancy CRU’s Rebecca Gordon said Wednesday, while the cobalt market should remain tight well into the next decade on continued supply shortness.

While massive growth in battery demand was set to see consumption of both metals soar in coming years, new lithium supply was expected to match demand by 2018, reaching a peak of 25% of total supply by 2022, Gordon told a Minor Metals Trade Association meeting in Dublin.

“The 2016 lithium cost curve shows why prices had to rise so sharply,” Gordon said, referring to lithium carbonate and hydroxide spot prices of over $10,000/mt in 2017, having doubled in less than 12 months on rising expectations of a demand boom from battery metals and tightness in supply.

“By 2020, the picture has changed, with brine expansions and new hard rock production keep prices in check and $6,500-7,000 the new cost level.”

By that time, China’s brine resources in Tibet and Qinghai were expected to come online, reducing unit costs, while spodumene resources in Sichuan and lepidolite resources in Jianxi were “committed and probable”, Gordon said.

Even modest demand forecasts see annual lithium output growing to 500,000 mt by 2020 from around 200,000 mt currently.

BENCHMARK BATTERY PRODUCTION

According to Benchmark Mineral Intelligence’s Andy Miller, also speaking in Dublin, lithium-ion batteries developed in “gigafactories” around the world, such as Tesla’s in the US, were expected to top 175 GWh by 2020, up from around 30 GWh now.

Tesla has recently said it will reach total production by 2018, in which time it will produce more lithium-ion batteries than were produced worldwide in 2013.

With electric vehicle production expected to be around 500,000 cars per year by the end of the decade, Tesla alone will require all of current lithium production.

But the story is bigger than Tesla. Over 60% of battery production in 2020 was expected in China, compared with around 20% in the US, Miller said.

“The lithium-ion industry is a China story,” Miller said, with Europe far behind.

Unlike CRU, Miller did not foresee supply outpacing demand in coming years and although he expected new spodumene supply to fill any deficit in the short term, prices should remain high on tightness.

The story for cobalt was similar, he said. Also a component in cathodes for lithium-ion batteries, prices have surged over 60% in the past 12 months on expectations of increased demand and supply tightness.

But whereas lithium supply has increased markedly in anticipation of greater demand, cobalt supply remained restricted.

Although traded on the London Metal Exchange, it is hard to access supply. Production is largely a byproduct of other metals such as nickel, so it is hard to get financing for projects based on cobalt prices, despite the recent spike.

The metal also comes nearly exclusively from the Democratic Republic of Congo, which brings with it significant supply risk, given issues around mining practice, including child labor.

CRU expected a deficit in both mined and refined cobalt supply this year and next and although stocks should be able to meet much of the increase in demand in the short term, new supply will be needed by 2020.

Artisanal supply was expected to play an important role, especially as a swing producer when supply is tight.

CRU has identified a number of processors located in the DRC around Kolowezi, Likasi and Lubumbashi, that sell concentrates believed to be derived from local small scale and artisanal operations, Gordon said.

Gordon estimated these produced around 10,500 mt of artisanal cobalt in 2015 and around 8,500 mt in 2016. She forecast around 10,000 mt this year.

At the same time, recycling remained a concern for both lithium and cobalt, accounting for a tiny proportion of refined supply currently.

With a 7-8 year life, electric vehicle battery recycling volumes should start to pick up after 2021 and producers such as Apple and Nissan have talked recently about the importance of battery recycling.

Both speakers agreed that more work was needed in terms of regulation or industry best practice in battery recycling to secure supply.

–George King Cassell, george.king.cassell@spglobal.com

–Edited by Dan Lalor, daniel.lalor@spglobal.com

Source (Platts)

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