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London (Benchmark) – 26 July 2016
Contracted prices for lithium carbonate and hydroxide are starting their migration towards the very high levels only common in China until this point.
Prices assessed by Benchmark Mineral Intelligence’s Lithium Data service show that lithium carbonate contracts are now being negotiated at above $10/kg range while lithium hydroxide’s level is much higher in the $15-20/kg range.
While still some way short of prices seen in China – a country which tends to have a more aggressive domestic pricing structure – it is further evidence that despite the recent lull in activity, the industry is still experiencing tight supply.
Prices within China, which have risen by up to four times since Q1 2015, had seen this upward trajectory slow in recent months – a major contributing factor being the wait for summer e-bus subsidy hand-outs.
Chinese lithium carbonate prices subsequently settled in the $20-24/kg range for some short-term contracts while hydroxide’s rise had slowed to between $26-30/kg.
Price rises down to a fundamental demand shift
The reason behind lithium’s stellar price rise over the past 18 months is squarely down to a fundamental lack of supply in the face of surging lithium ion battery demand.
In 2016, Benchmark expects lithium demand growth will reach close to 20% as China ramps up its government backed e-bus and EV production.
Many of these e-buses are not only destined for domestic Chinese use but are beginning to be exported around the world, with France most recently ordering 16 full electric buses – 15 of which are from Chinese major, BYD.
Uptake of these larger scale battery vehicles can be seen as the first wave of demand increases from the transportation sector, with passenger vehicles expected to follow suit as battery plant expansions drive down costs to a commercially viable level.
With the growing momentum behind transport electrification across the world, and the widespread acceptance that lithium will be the base cathode material in these battery technologies, the case for strong demand growth is becoming ever more compelling.
For the industry this is going to require a step change in the way suppliers currently operate, with four major suppliers controlling the world’s raw material supply.
Several brine and hard-rock operations are expected to come into production over the coming years, but the speed of their ramp up and the accompanying growth in demand from battery producers, will dictate the future direction of the industry.
Benchmark’s lithium price assessment service strives to collect accurate market prices, to a lithium-specific methodology. Independent reporting by Benchmark’s analysts covers all aspects of lithium carbonate and hydroxide supply and demand and includes the first ever pricing index, the BMI Lithium Index.
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