Lithium has had quite an exciting ride over the past year. Looking at the year to come, what are your thoughts regarding future lithium supply, demand, and pricing?
That’s probably the question on everybody’s mind. At the beginning of 2023, when prices softened, I don’t think this was really a surprise to us. We were forecasting a softening in lithium prices, but never to the point where they’ve gone today. I think the surprising thing for many has been the psychological aspect. The pricing that we’ve seen in China, its trajectory, has really been exacerbated by a few events. The RMB$200,000 price pass-through mechanism, the sheer number of announcements that have come out of China, and places like Zimbabwe and Australia. Those tonnes haven’t actually made it to the market, but they’ve impacted people’s perceptions of how many tonnes have potentially entered the market. On the other hand, there has been a softening in demand, but not as much as many have said.
I think in terms of demand, data suggests that the underlying demand is still strong. For the rest of 2023, we should see strengthening prices on the back of that demand. I mentioned the context, the softening, and that fall in prices because I don’t think that there’s enough time now for prices to reach all-time highs in 2023 before we again see seasonal softness in 2024. It’s going to be quite cyclical, and I think that mining investors are going to be used to that in a way. It presents opportunities, and it’s not necessarily a bad thing.
How have global events impacted the lithium markets and are there specific factors at play that investors or miners should be looking out for?
Geopolitics has played a huge role, and it goes without saying, but I’m going to say it anyway, the Inflation Reduction Act (IRA) has made a huge impact. I think there’s still reason to think that it may not impact mining. The IRA is focused on manufacturing, so opportunities in the refining of lithium are there for direct investment from the US government, but it’s not necessarily focused on the mining side.
However, now we’re seeing supply chain security become a real part of a conversation that wasn’t there even six months ago. It wasn’t taken so seriously. Bifurcation of markets, like with Ford, completely wanting to bypass lithium conversion in China. They just announced that big deal with Albemarle, SQM, Livent, and others. So, it’s real, something that’s material for investors, and creates an opportunity for a thematic investment. How that all plays out, I don’t know, but it’s certainly been important that China doesn’t have a strangle hold on lithium. In terms of conversion capacity and the skills and understanding they have in China, they really are dominant in the downstream lithium market. Getting away from that dominance is something that investors and governments are looking to do. It’s certainly a strong theme.
Data suggests that the underlying demand is still strong. For the rest of 2023, we should see strengthening prices on the back of that demand.
The lithium triangle has always been an important region for lithium as it accounts for about 60% of known reserves. How do you see Chile’s announcement last month affecting lithium in the near term? Does Chile’s new lithium programme change anything?
I don’t think it changes much. We weren’t really forecasting a lot of expansion to come out of Chile, because there were really limited greenfield projects being developed there. For the incumbents, it does change a lot in terms of their requirement around DLE. Maybe not so much the national strategy as it relates to nationalization, as people are calling it. It’s not necessarily nationalization, it’s more of a negotiation from the government to retain some control over those operations. I don’t think that’s a bad thing or limiting to expansions in those regions. I think the DLE component and that requirement around that will be difficult. I think this is not insurmountable, but difficult to comply with.
We’ve seen countries like Canada and Australia trying to grow their lithium mining capacity. Is there pushback in these places against further mining?
I don’t think there’s pushback in Canada. I think it’s a strong mining jurisdiction and the same can be said with Australia. There’s a lot of open land, sparse population, and nearly no competition with agricultural uses, which I think becomes a problem when we see mining encroaching on urban populations.
Canada is a natural place for the US to receive feedstock for conversion facilities that are domestic. The relationship that’s just been announced between Biden and Albanese, essentially with the intention that Australia would become a domestic source for US lithium, is exciting for Australians. And I think that it does kill a couple of birds with one stone. It allows the US to have a domestic source of lithium offshore and avoid NIMBYism, (which is there in the US.) Although some would argue that it’s not about people that are NIMBYs, it’s more about a lack of education that mining can be done sustainably in a transparent way, but that’s not necessarily the narrative. I think that there’s a lot to overcome, but as a quick solution, the involvement of the US with Australia and Canada navigates that problem quite nicely.
Finally, how do the different battery chemistries impact lithium supply and demand in the general outlook?
Lithium prices impact lithium efficiency and density in the cathode, and I think that’s a big factor in lithium demand, more so than say the mix of cathodes that consumers or that OEMs desire. Whether it’s LFP or high nickel, lithium is still going to be used. If we’re talking about competitive cathodes, (and potentially sodium ion,) I don’t think those are going to make a big impact, if any in the short to medium term, it’s still more or less a laboratory experiment. In the long term, sodium ion will make some impact, particularly in stationary storage. But in terms of it being a competitor, it’s not too serious for lithium, and lithium demand itself is very much safe.
