During our world travels and meetings with investors, we constantly get asked where we see prices in 2017. We have consistently answered that we do not expect a lithium price crash in 2017 and the signs are pointing to further price increases, especially in China after Galaxy Resources signed a spodumene contract for $830-905/tonne – way up from the ~$650/tonne peaks in 2016.
The contract Galaxy has signed is binding and includes a $15/tonne premium for every 0.1% Li2O the company’s spodumene can reach up to 6.0% Li2O. For example, the lowest price that the company is guaranteed to receive is $830/tonne for 5.5% Li2O material. The deal has set a new high in the lithium feedstock market.
Benchmark Mineral Intelligence originally forecasted a spodumene price increase of 15% in 2017 as Chinese chemical converters compete for limited supply on the market place. With Galaxy Resources and Neometals both ramping up new operations in 2017 and further additional supply expected from Talison, the indicators would logically point to a price decline from 2016’s highs.
However, Benchmark’s position is that such is the demand from the battery sector and cathode manufacturers expanding operations within China, spodumene supply will remain in shortage for the next 12 months – the players in the lithium market are far more concerned about supply than price at the moment.
Within China, the competition for lithium feedstock continues to be aggressive as lithium converters vie for ever increasing market share. Therefore, we continue to foresee a sellers’ market and strong prices despite increased spodumene competition.
The difference with lithium and other minerals and metals is that it is underpinned by a real demand story – the evolution of the lithium ion battery sector with force significant change in the raw materials we track at Benchmark Mineral Intelligence, especially lithium, graphite, cobalt and nickel.
Of the 14 lithium ion megafactories Benchmark is tracking under construction, 9 are based in China and the supply chain from mine to market is evolving to serve these operations. We expect this evolution to take place over the next four years and it will subject each link in the chain (raw materials, lithium chemicals, cathodes, cell manufacturers) to unprecedented volatility.
Lithium’s price trend is evidence of this but just the start.