The global lithium market becomes focus of attention

Written by The Frontier Post

Alexander Sobko

The global lithium market has become the focus of global attention. After all, the price of this metal has risen tenfold over the past year and a half, while lithium is a key component for batteries, and therefore electric vehicles. The increased demand from this sector caused the price increase.
First, the base numbers. By the way, remembering such numbers is always important for understanding the market and its scale. For example, everyone who is interested knows that global oil consumption is about 100 million barrels per day, and Russian gas exports to Europe and Turkey are 150-200 billion cubic meters per year, and so on. These inputs help us navigate the flow of information by comparing it with news figures; it becomes clear how important this or that event is.
But there are two peculiarities in the global lithium supply and demand data.
First, the lithium market is growing rapidly: at a level of at least 20% per year. Therefore, the numbers become outdated very quickly, for example, in the first half of 2022, statistics from 2020 are available, but in fact in 2022 demand will already be 40% more. One way or another, lithium market experts estimate demand this year: 640,000 tons. And already in 2030, the expected demand will be two, according to some forecasts, and three million tons.
Secondly, in most cases (as above) data are given in terms of lithium carbonate, this compound is one of the most common commercially available forms of lithium. But sometimes estimates can be in terms of pure metal, this is how the very popular annual statistical compilation of BP gives its information. The difference will be significant: in lithium carbonate, the content of lithium itself is 19%. Accordingly, the figures in this case will be about five times higher than the pure metal estimates. This also needs to be kept in mind. At present, the volumes of lithium used for the battery industry and other sectors are comparable. But all the rapid growth in demand will be associated with batteries, as a result, by 2030, only 14% will fall to the share of other segments.
The largest producer of lithium is Australia (46%), followed by Chile (24%), China (16%) and Argentina (6%). In addition, Bolivia has significant reserves of raw materials for its production. It is to this country that our attention is riveted after the refusal of Argentina and Chile to supply lithium to Russia, but so far very small volumes are mined in Bolivia (at the level of a thousand tons per year). In any case, these three South American countries are important players in the lithium market, some now and some in the future.
There are two main traditional mining methods. The first is from brines of special groundwater with a high content of lithium. This variant is used in Argentina, Chile and China. The second method is extraction from the mineral containing lithium – spodumene, it is used in Australia.
So, lithium prices have risen tenfold. From about 7.5 thousand dollars per ton (again in terms of carbonate) at the end of 2020 to 75 thousand now. What is important in the first digit? It is close to the cost of lithium mining for a significant part of manufacturers. That is, many companies earned the usual rate of return at these prices. There are enough lithium reserves in the world, but it takes years to develop a new deposit, and demand is already driving up prices. But since the most profitable reserves are initially involved, the cost of even traditional production at new sites will be higher, which may lead to the fact that even after the current “bubble” blows off, prices will not fully return to the old levels.
As you can see, the entire current lithium market can be estimated from four billion dollars (if you count at the cost of production and “old” prices) to, respectively, 40 billion in the current “bubble”. Large sums, but on a planetary scale, very small. In part, this once again highlights the fact that the electric vehicle industry still occupies a small market share. But there is also a second reason. The share of expenses for lithium and other metals in the total cost of batteries is small, the main added value is formed at other stages of production. As a result, even such a multiple increase in lithium prices leads to a moderate increase in the cost of storage devices. Estimates vary somewhat, especially since other metals and primary materials have also risen in price. But we are talking about a maximum of tens of percent. Price increases have already led to.
What does all this mean for Russia?
Our country is an importer of lithium raw materials, and therefore, it would seem, is interested in low prices. So far, demand is not so great, but with the construction of new battery factories, it will increase. However, strange as it may seem, Russia benefits from expensive lithium.
Firstly, in our country there are its reserves. If we talk about minerals, then they are, for example, in the Murmansk region. In addition, the option of associated production of lithium from brines in Eastern Siberia, at the Kovykta field, during gas production is being considered (the gas itself will go from there to the Power of Siberia ). But the cost will be higher than in other regions. The lithium concentration in our brines is lower than in Latin America. Therefore, other, so-called unconventional methods of lithium mining will be used. In particular, direct extraction. Of course, this method is more expensive. And it becomes competitive at high prices, say $25,000 per tonne of lithium carbonate.
The exact cost of such extraction will directly depend on the concentration in the brine. As you know, in the most distant future, when and if other reserves of lithium in the world run out, its extraction from sea water is also being considered, the only question is cost.
Of course, it is possible to mine lithium in our country at any global price, protecting the domestic producer with import duties. But this will negatively affect competition. The situation here is somewhat reversed with the oil industry. Just as other countries with reserves of unconventional oil begin to produce it on their own at high prices, so Russia will be self-sufficient in lithium with a steady increase in them.
Secondly, there is a more obvious aspect, it is related to electric vehicles. Speaking about the prospects for oil prices, we understand that we have uncertainties on the supply and demand side. On the supply side, the main positive for the price is the underinvestment in production. But there is a risk on the demand side – a gradual transition to electric vehicles. Recall that if we leave out the issue of convenience and availability of infrastructure, then there is competition between traditional cars and electric vehicles on the so-called total cost of ownership, taking into account fuel costs for the entire period of operation. Gradually decreasing cost made the electric car more attractive. Although forecasts vary widely, in any case, other things being equal, expensive lithium or its physical shortage will slow down electric mobility, which will allow oil demand to last longer.

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