The prices for Electric Vehicles (EV) battery-grade lithium are expected to rise by 50 per cent within the year as it currently stands at an all-time high of $35 per kilogram in Asia, a Rystad Energy analysis shows.
According to the analysis, the hike is expected to keep going up to $50 per kilogram in the second half of the year and hit $52.5 per kilogram in January 2023.
Rystad Energy projection expects the supply of lithium salts to remain tight through the first half of 2022 at least, due to lagging production in China and South America.
“Interest in lithium iron phosphate (LFP) batteries has taken off among manufacturers since early 2021.”
However, manufacturers appear reluctant to sell significant volumes on the spot market, as supply constraints and the ongoing logistical issues caused by the pandemic create bottlenecks in the trading market for lithium salts.
“Chinese producers are hesitant to sell lithium salts on the spot market due to constraints caused by a slowdown in lithium carbonate production in Qinghai province in recent months.
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In the same sense, suppliers in South America’s lithium triangle are reluctant to allocate volumes outside long-term contracts despite their planned ramp-up in 2022, taking a cautious stance because of the ongoing logistical challenges.
This supply tightness for lithium salts, combined with the optimistic demand outlook for LFP batteries that typically feed on lithium carbonate, is expected to keep lithium carbonate prices high and support a notable premium over the price for lithium hydroxide in early 2022.
However, the Energy firm estimates this premium will gradually narrow after seasonal supply bottlenecks ease in China and a ramp-up plan in South America materializes.
Susan Zou, senior analyst on Rystad Energy’s battery materials team, said, “A fresh new driver for China’s lithium market is lithium contract prices on the Changzhou Zhonglianjin exchange platform.
“Launched some six months ago, the futures contracts have driven sentiment in the market to some extent, especially over the past two months.
“This has contributed significantly to the current momentum in lithium prices in China and made trader-suppliers who have attempted to destock in January hold back from selling for now,” she said.
In furtherance, Zou said that the Changzhou’s lithium contract price for February 2022 hit an intraday high of Chinese Yuan Renminbi (CNY) 418,500 per tonne on January 10, up 14.34 per cent from CNY 366,000 per tonne at the close on December 31, 2021.
“The contract price then dropped to CNY 345,500 per tonne at close on January 12.
“However, it is still too early to say whether Changzhou’s lithium contract price will repeat the success of the cobalt contract on Wuxi, which has long dictated cobalt prices in China’s physical market,” she said.
