Skip to main content

Fastmarkets: lithium market updates

Published by , Editor
Global Mining Review,

Peter Hannah, Index Manager at Fastmarkets, outlines the drivers of recent lithium price movements and the key challenges in supply going forward.

Price movements

Lithium prices have been surging throughout 2021 after a three-year slump finally bottomed out at the start of the year. Spot prices for battery-grade lithium carbonate and lithium hydroxide in the domestic China market now stand at ¥182 500/t and ¥175 000/t, up 238% and 302% respectively from their levels at the start of the year. On a seaborne cif China, Japan, Korea (CJK) spot basis, carbonate is trading at US$20.5/kg while hydroxide is at US$21.5/kg – up 204% and 139% respectively from their early-January 2021 levels. By far the standout performer though has been spodumene concentrates, where spot prices are in the order of US$2000 – US$2500/t – up 395% from January 2021.

Market drivers

While lithium enjoys a secular tailwind thanks to the unfolding electric vehicle and energy storage revolution, cyclical peaks and troughs in price are inevitable. The three years prior to 2021 saw a tough grind lower, but the adage of bear markets being the authors of bull markets eventually bore out. Following an extended period of destocking and a number of production shut-downs, supply tightened just as demand was surging back post-COVID, starting the turnaround in prices that are still being seen today.

The price rise in recent months has been led by the rally in China’s domestic market, where spot trading is more active than in the international seaborne markets. Price action in the Chinese market has also seen lithium carbonate outperform hydroxide and technical-grade units trade at parity with battery-grade material. This dynamic owes to the resurgence of demand for LFP cathode batteries, which consume carbonate rather than hydroxide, and can often utilise material with higher impurities.

At the upstream end of the market, tight supply of spodumene concentrates from Australia’s hard rock producers has also been a push factor for prices of lithium chemicals. 4Q21 contracts are anticipated to be negotiated significantly higher in the wake of a handful of highly priced spot deals, which raised questions as to whether convertors would still be able to maintain a profitable margin. The industry can rely on the market itself to figure that one out though; there is no rule stating that chemicals prices must dictate those for spodumene, and it may indeed be seeing the raw materials prices leading the dance during this particular upswing.

What next?

In the immediate term, prices have stalled for the past two weeks thanks to a combination of some profit taking and strategic waiting-and-seeing around the time of China’s Golden Week national holiday. While the market remains tight, market participants are also evaluating the potential impact of China’s energy consumption restrictions, with some cathode makers in Hunan and Jiangsu being forced to halt or cut production by 50 – 70%. If these restrictions persist, the ease in demand may cool prices and give buyers some breathing space to restock, but Fastmarkets Research analysts note that it is too early to tell.

Consumers also have to worry about lithium supply tightening even further moving into the winter months, during which brine production from China’s Qinghai province is seasonally lower. Everyone is looking towards Australia and South America for a meaningful supply response, but realistically this may only start to unfold moving through 2022. Fastmarkets Research also warns that qualification requirements, even if accelerated as much as possible, may delay how quickly this material can make it into the battery supply chain. Albemarle’s recent acquisition of lithium processor, Guangxi Tianyuan New Energy Materials Co. Ltd, may be perceived as a ray of hope for buyers if it heralds the restart of the Wodgina spodumene mine, which Albemarle joint-owns with Mineral Resources Ltd.

Read the article online at:

You might also like


Embed article link: (copy the HTML code below):


This article has been tagged under the following:

Lithium mining news