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Lithium prices will likely remain elevated for years despite plans for a ramp-up in supply, the world’s biggest miner of the battery metal, Albemarle said, as quoted by the Financial Times, today.
According to the company’s head of lithium, Eric Norris, the reason for the extended rally would be a fundamental transformation of the lithium market.
“One of the reasons that we see things being so tight is just the market is fundamentally different,” Norris told the FT. “In 2019, the market didn’t grow very much and it was 300,000 tonnes. Prior growth rates may have been 30,000-50,000 tonnes a year.
“Today, the market grows 200,000 tonnes a year, almost the full size of what the market was back then,” the Albemarle executive added, saying that the average size of a new lithium project was about 5,000 tons.
Yet even at such growth rates, there will not be enough lithium to satisfy the projected demand for the metal, which is crucial for EV batteries. And based on the latest EV sales and projected sales numbers, there is not enough lithium being produced now and there will not be for a while yet as demand grows faster than supply.
Because of this imbalance in the lithium market, some observers are forecasting a supercycle for the battery metals, as long as EV sales projections remain unchanged, which is far from certain: because of rising prices for not just lithium but many other metals, EV prices are also going up, which makes them less attractive for buyers.
Yet not all analysts are as bullish on lithium. According to Goldman Sachs, for example, after hitting $80,000 per ton this year, lithium prices will drop to $11,000 by 2024 because of EV overproduction in China and the start-up of new mines, the FT noted in its report.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.