EVs have lithium booming — and this time, there is no bust in sight
Bloomberg News and appeared in Mining.com | October 27, 2021
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Lithium is hot—again—though this time the rally looks to have more staying power.
The market has exploded, with a benchmark index more than doubling in 2021 and key prices in China hitting records. Driving the frenzy is the silvery metal’s allure as a commodity of the future: It’s one of the key components for the rechargeable batteries used to power electric vehicles.
Lithium has been down this road before. Prices more than tripled from early 2015 to a record in March 2018, only to collapse again as output rapidly expanded. Analysts and experts say this time is different because the EV boom has well and truly started. Producers have also learned their lesson from the last crash and are now preaching discipline.
The upshot is that supplies are tight enough to force battery makers to take on long-term contracts that are more favorable to producers. Some are even taking the bold step of buying up mining assets. In the end, lithium prices could be so high that it raises costs for batteries and EVs just as the world needs more clean-energy sources.
Suppliers in driver’s seat
“It’s kind of like revenge of the miners,” said Joe Lowry, an independent consultant known as Mr. Lithium for his decades in the industry.
“The suppliers are in the driver’s seat, and it’s going to stay that way for a while,” he said.
The dynamic means demand will likely outstrip production over at least the next five years, Morningstar Inc. predicts.
There aren’t a lot of new mines being built, and the few projects that are underway probably won’t ramp up until mid-to-late 2023, according to Chris Berry, president of industry consultancy House Mountain Partners.
Berry forecasts prices could jump another 15% by next quarter to reach about $30,000 a metric ton in the spot market.