Global lithium consumption estimates vary widely depending on the source used, however is set to increase, on average, 3 to 5 times over the next 10 years, placing pressure on the battery supply chain and the lithium market in general. Today's demand of approximately 250,000 tonnes of LCE is expected to have a tremendous growth due to growth and penetration of electric vehicles worldwide. Furthermore, lithium-ion battery costs are falling rapidly as global battery producers expand manufacturing facilities, unlocking economies-of-scale.
Lithium is produced from either brine-based deposits or from hard-rock mineral deposits at an approximate ratio of 50/50. Lithium products derived from brine operations can be used directly in end-markets, but hard-rock lithium concentrates need to be further refined before they can be used in value-added applications like lithium-ion batteries. The current lithium supply market is dominated by four major producers. Albemarle, SQM, FMC and Sichuan Tianqi accounted for 83% of global supply in 2015. An increase in lithium prices in the late 2000's led to a wave of investment in mine expansions for South America-based lithium brine assets and increasing conversion capacity in China for hard-rock lithium feedstocks. However, stagnant global growth met an oversupplied lithium market, leading to depressed lithium pricing from 2013 until mid-2015.
The lithium supply market is relatively small compared to most other industrial commodities; however, it is not a fragmented market or lacking large market participants with the ability to deploy capital. The five largest global producers have a combined market capitalization of over US$60 billion. Further, these five companies control close to 50% of global reserves and over 90% of current production.
Lithium pricing is complicated and confused by many industry participants. To start, in a simplified world lithium products can be generally defined three main products with many variables within each products: lithium carbonate (battery ready and technical), lithium hydroxide (battery ready and technical) and spodumene concentrate (a precursor for lithium carbonate and lithium hydroxide). Additionally, depending on the location (China, Korea, japan, Europe or North America) pricing differs widely.
Over the recent past, due to high pricing in 2017 and early 2018, large capacity of hard rock projects were build which delivered raw materials to China in order to produce final lithium products. This capacity ended up being too high and prices dropped significantly. Recently in early 2020 prices for lithium, are expected to climb in one to two years, when shortages in the market caused by curtailed production and halted expansions start to emerge.
There are many industry participants that deliver industry information and consultancy. We invite each of you to look into the following websites in order to understand the aspects that influence the demand, supply and pricing variables of lithium.