Global demand for lithium to touch 1.0 Mt LCE by 2027

Global demand for lithium, mainly driven by the lithium-ion battery industry, is set to grow exponentially will continue to be the main catalyst for its growth. The lithium ion battery industry, which accounted for around 50 percent of consumption in 2017, is expected to reach over 80 percent by 2027, says Roskill, a London-based consultancy agency.

The report states that growth in the consumption of lithium accelerated in 2017, by over 10 percent on 2016 levels, to reach 211,000t lithium carbonate equivalent (LCE). Automotive applications were the largest market for Li-ion batteries in 2017, with Chinese sales of plug-in electric vehicles (PEV) increasing by around 20 percent year on year. This placed a strain on the battery supply chain which is likely to continue; Roskill estimates Chinese PEV sales could reach around one million units in 2021.

The lead time between first purchase of lithium compounds and then subsequent use in Li-ion battery applications created by the automotive industry supply chain increased 'demand' ahead of consumption by 9 percent in 2017, a trend which is expected to intensify over the coming years. Demand for lithium is expected to approach 1.0Mt LCE in 2027.

The report states that the lead-time between first purchase of lithium compounds and the subsequent use in lithium-ion battery applications created by the automotive industry supply chain increased 'demand' ahead of consumption by 9 percent in 2017, a trend which is expected to intensify over the coming years. It estimates that the demand for lithium is expected to approach 1.0Mt LCE in 2027.

According to the consultancy firm, lithium carbonate continues to remain the main lithium product used for batteries constituting over 80 percent of consumption. It expects the use of lithium hydroxide to become more prevalent, however, accounting for over 25 percent of lithium compounds used in rechargeable batteries by 2021 and around 55 percent by 2027, as end-users switch to high-nickel cathodes as a result of their higher energy density and lower cobalt content.

The increase in demand for lithium compounds used in the lithium-ion battery industry has also built on top of steady demand growth from industrial applications, which is expected to track more closely to the GDP growth.

It forecasts that the strong demand growth which has incentivised the expansion of existing assets and development of new lithium operations. The build-out of new and expanded capacity is expected to continue the oversupply of mined products, and further extend it to refined products from 2020. Despite the oversupply, markets for battery-grade lithium compounds are expected to remain tight as the barriers to entry for higher grade products are more complex and the demand growth is greatest for these products.

The mine supply of lithium is forecast to reach over 365,000t LCE in 2018 including processed DSO, with the supply of refined lithium expected to total 270,000t LCE. Roskill predicts by 2027, lithium mine supply will increase by over 160 percent, while refined supply is forecasted to more than treble to 900,000t LCE. Along with supply from secondary sources expected to show continued growth throughout the forecast period, albeit still representing less than 5 percent of total refined production by 2027.

The price for lithium continued to increase in 2017, for both contract prices, and Chinese spot material. Lithium carbonate and hydroxide prices are forecasted to peak in 2018, before greater supply availability causes prices to fall back in 2019.

A floor price of $11,000/t (Rs 700,000/t) battery-grade lithium carbonate is expected, before continued demand growth for battery grade lithium compounds applies greater demand-side pressure on prices beyond 2021.

The report concludes that the premium for battery-grade lithium hydroxide, over lithium carbonate to re-emerge in the short term, but could disappear with more independent lithium hydroxide production from mineral concentrates.

(Representational image courtesy - e+)