Warnings of a lithium glut may be premature.
For one thing, doomsayers assume all the lithium in brine or hard rock deposits will get processed, but that's not the case, said Jay Roberge, partner and managing director at Tehama Capital Corp., a Vancouver-based merchant bank.
"There's no shortage of lithium in the world, but the concern is processing it and developing it into lithium carbonate, lithium products and lithium metal," Roberge said in an interview. "Not all lithium projects that will have a decent grade of lithium are necessarily economical, because you have to be able to process the lithium into the end-product."
Surging demand for lithium in batteries for electric vehicles has caught the attention of investors in the past two years. Still, more output may be on the way. Morgan Stanley cautioned in February that excess supply will come as soon as next year, while Wood Mackenzie has said supply is likely to outpace demand more aggressively, spurring a price decline from 2019.
While there's an oversupply of mined product which will grow in 2018 and next year, refined products remain relatively tight considering all the variants produced and consumed, according to Roskill Information Services.
Miners have contested claims of a glut. Canadian company Nemaska Lithium Inc. sees a very tight market in the next four to five years and reports of oversupply are "grossly overstated," CEO Guy Bourassa, said. Mass acceptance of electric vehicles will build through 2019 to 2021, spurring demand for battery materials, said Carlos Vicens, CFO at Neo Lithium Corp., which may start production in 2021.
Roskill sees double-digit expansion in lithium demand given the momentum in electric vehicles, with batteries accounting for more than half of consumption in 2018 or 2019 and rising to more than 90 percent by the mid-2020s, according to managing director Robert Baylis. The global lithium market could expand 20 percent this year, according to Sociedad Quimica y Minera de Chile SA. Last year, demand grew about 17 percent, it said in its annual report.
There are many additional uses coming for the metal, which haven't been factored in, Roberge said in a panel discussion at a Hong Kong conference Thursday. He cited the example of a cargo container in China that was fully electric and powered by battery packs. Guangzhou Shipyard International Co.'s battery electric ship is equipped with a mix of lithium ion batteries and super-capacitors for a total energy capacity of 2.4 megawatt-hours, according to a Bloomberg New Energy Finance report.
"That's a lot of battery power and a lot of demand," said Roberge, who spoke both at the panel and in the earlier interview on March 29. "If they start making these things en masse, the car market might look small."
Still, there will be a point in the future where supply and demand reach an equilibrium and at that point, prices may stabilize, Roberge said during the panel. The lowest cost producers of lithium and lithium carbonate and other end-products will win the day, according to Roberge.