Lithium market might go into deficit from 2022, says Benchmark Mineral Intelligence

The raw material prices for Lithium-ion batteries (LIBs) have been on a constant rise for the last 6 months, resulting in an increase in the EV battery prices. Simon Moores, CEO at Benchmark Mineral Intelligence recently shared on LinkedIn that Lithium’s supply demand gap is set to increase significantly in 2022. LFP EV battery prices might rise 16% whereas NCM cell prices might increase by 20% in the coming year.

We caught up with Manish Dua, Principal consultant at Benchmark Mineral Intelligence, to understand the trend, underlying causes, and forecast for the coming year.

What are Benchmark’s observations about lithium-ion cell prices and raw material prices over the last year?

Every major automotive OEM has made significant commitments to fleet electrification over the coming decade. Industry commitments are now being supported by a more global policy push to support clear energy and protect the interests of domestic automotive industries. Incentives and stimulus packages have been rolled out. Over the last 18 months, we have seen a rising trend in the prices for LIB raw materials.

Let’s talk about lithium first. Lithium carbonate is typically used in LFP batteries. The price for Lithium carbonate in China has reached the $29,000 – 30,000 mark as highlighted in our mid- November price assessment, i.e. an increase of more than 300% on a YTD basis.

We have seen exceptional domestic Chinese demand for LFP cathode material over the course of 2021, a price dynamic that could maintain on the back of indications from key automakers such as Tesla, Ford, Volkswagen, and Mercedes that base range models will utilise LFP-based cells. Lithium hydroxide is typically used in the Nickel rich batteries. The price of Lithium Carbonate and Lithium Hydroxide have both moved in sync with each other, with the former registering slightly higher numbers.

Average pricing for hydroxide EXW China in the first half of November increased marginally, by 0.5%, to $29,825/tonne – ranging between $28,725- $30,925 per tonne.

What about other raw materials on the cathode side?

Materials like Nickel Sulphate have also seen a price increase. Nickel Sulphate price is linked to Nickel getting traded at the London Metal Exchange (LME). Similarly, the prices for Cobalt Hydroxide and Cobalt Sulphate trade at premiums or discounts to cobalt traded at LME. Looking ahead, Benchmark projects that sulphate prices could experience further downside pressure in the coming weeks, on improved raw material availability, with any downside pressure likely to be limited by robust exchange pricing.

Iron ore prices have also risen, although they have come back sharply over the last month and a half as China is planning to shut down or restrain steel production, given the upcoming Winter Olympics. But they are still at very high levels compared to the prices 12 to 15 months ago or before the pandemic. Alongside these major raw materials, we have also seen a price increase, particularly for fringe elements such as binders, additives and other components. These prices have also gone up over the last six to nine months.

How about the trend on the anode side?

On the anode side of things, there are two raw materials that are typically used. One is Natural flake graphite and then you concentrate it and spheroidize it. Typically for these materials, a lot of capacity is already in place. Sharp price movements haven’t been observed on the anode side.

What is the main reason behind these soaring raw materials prices?

There are two issues. One is supply-demand given the huge upsurge in announcements as well as battery manufacturers trying to shore up their lithium carbonate and lithium hydroxide supplies and pick up any available material. The second reason is the inflationary pressures impacting the cost. The carbonate and hydroxide refiners are trying to increase the prices to factor in the inflationary pressures coming from increasing raw material costs and the costs.

Energy costs have gone up, particularly over the last three to four months. The coal cost has gone up, natural gas prices have gone up, and so has labour cost. To absorb those costs, Li carbonate and hydroxide manufacturers have tried to pass some on to the cathode makers, which would further be passed on to the OEMs.

How do you see that trend evolve over the next year 2022?

We at Benchmark have been predicting that Lithium market could potentially go into deficit from next year onwards. In that case, the prices might go further up from the current levels.

What do you mean by a Lithium deficit – as in there won’t be enough Lithium to go around?

The demand is going up, supply is trailing behind. It takes 5 to 7 years for a mine to get operational from the time a deposit is discovered. The facilities to process the ore and convert it into chemicals, i.e. hydroxides and carbonates, take 2-3 years to come up. Further, you make cathodes and anodes using these raw materials, and such plants have a commissioning period of further 2 to 3 years. So the longest lead time in this supply chain is the upstream part – exploration and mining. From 2021 to 2022, we see a more than 20% demand growth in Lithium while the growth in supply remains low.

Are Nickel and Cobalt upstream chains placed better than Lithium?

For the time being, Nickel and Cobalt upstream chains are placed better than Lithium. However, going forward, as the demand from battery manufacturers keeps growing at this rate, these could also go into deficit in the near future.

For upcoming two to three years, do you see the prices of batteries rise for the OEMs?

We at Benchmark have been predicting this. The battery prices were on a downward trend till 2019-2020, but this may not be sustainable for the near future. Over the last 12 months, the price increase in raw material has been too much for the market to take, and now the battery manufacturers are passing on the increasing prices of raw materials to the OEMs. For the first time, you’re seeing chatter in the market that battery prices are being quoted at a higher rate compared to the past.

One factor why battery prices had been decreasing earlier was the advancement in technology and energy density. Would that not offset the prices in near future?

Yes, we have seen improvements in the cell to pack technology as you rightly pointed out, but it would be interesting to see how technological and energy density improvements’ deflationary impact would stack up against raw material prices’ inflationary effects.

This interview was first published in EVreporter December 2021 magazine that can be accessed here.

Subscribe & Stay Informed

Subscribe today for free and stay on top of latest developments in EV domain.

2 thoughts on “Lithium market might go into deficit from 2022, says Benchmark Mineral Intelligence

  • “Lithium-ion battery technology is the most common type of rechargeable battery used today, The world’s lithium reserves are expected to be depleted by 2040.

    As the article says, the demand of lithium battery is increasing with decrease in supply making experts predict the deficit from 2022. Thank you for sharing a detailed article.”

  • Lithium-ion battery price will come down once other technology implemented.


Leave a Reply

Your email address will not be published. Required fields are marked *