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Lithium Market Update: Q2 2021 in Review

Click here to read the previous lithium market update.

The first few months of the year have been bright for the lithium market. 

Despite the volatility brought by the coronavirus pandemic to every market, lithium has shown resilience and prices have been performing on an uptrend during the first half of the year.

Interest in battery metals continues to increase as electric vehicles (EVs) take over news headlines around the world.

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How did the metal perform in the second quarter of 2021, and what’s ahead for lithium in the near term? Read on for an overview of the main news that impacted the lithium market in Q2, plus a look at what investors should watch out for the rest of the year.

Lithium market update: Price performance

Prices increased at an unexpected speed during the first three months of the year, on the back of strong demand from the electric vehicle market.

Following a strong start of the year, lithium prices continued this positive trend in the second quarter.

“Lithium chemical and feedstock prices continued to perform well in Q2, following tightening supply-demand fundamentals which pushed the market into a rising price environment during Q1 2021,” George Miller of Benchmark Mineral Intelligence told the Investing News Network (INN).

The Benchmark Global Weighted Carbonate Price rose by 15.6 percent across the quarter, and its equivalent Benchmark Global Weighted Hydroxide Price rose by 34.5 percent, while spodumene prices rose by 11.1 percent (FOB Australia).

Speaking with INN about the lithium market in the second quarter, James Jeary of CRU said spot prices were largely steady in China.

“Q2 is typically slightly weaker for EV sales which weighs on demand, although May sales were stronger than previously expected,” he added.

News from top producers pointed to demand growth, with Chile’s SQM (NYSE:SQM) reporting a 180 percent jump in lithium sales volumes in the first quarter.

As a result, the miner is looking to fast-track existing expansion plans in Chile’s lithium-rich Atacama salt flat. SQM’s new target is to reach 180,000 metric tons of lithium carbonate and 30,000 metric tons of lithium hydroxide in Chile by the end of 2022.

Rival Albemarle (NYSE:ALB) also posted positive Q1 results, saying it’s in the final stages of two projects to boost its lithium processing and expects to approve further expansion projects in Q2.

Argentina-focused Livent (NYSE:LTHM) exceeded profit expectations in Q1 due to rising lithium sales. Longer-term, Livent’s plan remains to triple its carbonate capacity in Argentina to roughly 60,000 metric tons and to expand hydroxide capacity in multiple geographies to meet growing customer demand.

Meanwhile, China’s Ganfeng (OTC Pink:GNENF,SZSE:002460) had plenty of news throughout the quarter, acquiring a stake in a lithium mine in Mali for US$130 million; receiving approval to build a 20,000 tonnes per year lithium plant for its Mariana project in northern Argentina; and set to buy Millennial Lithium for US$353 million.

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Lithium market update: Supply and demand

Demand is set to continue to rise for lithium products in the next quarter, following the trend seen so far in 2021.

“Electric vehicle sales across all jurisdictions have been improving, and cell manufacturers and cathode manufacturers alike have been scaling production efforts and expansion plans in order to cope with forecasted demand growth,” Miller said.

Demand trends are strong for both carbonate and hydroxide, he added, given the popularity of LFP cathode material in China, for shorter-range, durable, lower-cost electric vehicles.

“(This) co-exists with demand for higher-nickel cathode types in all end markets, which can provide longer range travel and higher energy density for consumers with range anxiety,” he added.

Jeary agreed, saying the strength in demand will remain in H2.

“China will continue to be strong and we expect good sales in US and Europe, although year-on-year the latter’s growth may not be as strong because of the effect that subsidies being introduced had in 2020 H2,” he said.

The CRU analyst added that, currently, demand for hydroxide seems to be stronger than carbonate in China, due to production of high-nickel cathode chemistries.

In terms of supply, Benchmark Mineral Intelligence’s outlook has been revised upwards slightly, reflecting the increasing rate of ramp-up for both brine and hard rock sources.

“Despite this, the increase is unlikely to meet rising demand, placing both chemicals in a very tight position by the end of this year,” Miller said.

Similarly, CRU’s supply forecast has increased slightly due to strong Q1 (and assumed Q2) for spodumene miners in Australia.

“Production guidance has increased for some mines, which will see output remain strong in H2,” Jeary said.

Partnerships continue to take place in the lithium space, with Orocobre and Galaxy Resources joining forces in what Miller described as an “extremely significant” partnership.

“The new joint producer is set to become the sixth biggest in the world in terms of production volume, alongside controlling a formidable range of assets both in development and greenfield,” Miller said.

In terms of expansions, for the expert, some of the biggest plans have stemmed from Ganfeng Lithium, which appears to be aiming to retain its stronghold as one of the largest chemical converters within China, with a focus on upstream acquisition to secure feedstock supply.

“We have definitely seen an increasing frequency of investment announcements since the beginning of 2021,” Miller said. “What has been especially interesting is increasing involvement in the lithium value chain from downstream automotive OEMs as they confront a looming deficit in raw material supply.”

He pointed to the example of General Motor’s (NYSE:GM) announcement that it would invest in Controlled Thermal Resources, a lithium developer intending to generate supply from the Salton Sea in California.

“We anticipate more of these announcements as automotive OEMs work to secure critical mineral supply for their cell supply chain in the future,” he said.

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Commenting on the main hurdles miners in the space face today, Miller said the biggest challenge, and opportunity, for lithium producers will be meeting customer demand and in turn maintaining market share.

“Lithium developers will have to take risks to scale to meet forthcoming demand from the battery market, whether that includes investing in new assets, new production methods, or making acquisitions in order to scale quickly enough,” he added.

For Jeary, despite the demand prospects, supply-side discipline will remain important for lithium miners.

“Expansions, restarts and greenfield supply growth must come online in a timely manner to prevent a return to oversupply,” he said.

For lithium developers and explorers, the analyst said it can be hard to get established in a market dominated by large incumbent producers which are looking to consolidate market share.

“Mergers and acquisitions by majors could be an opportunity for juniors to get a better foothold in the market,” he said.

Lithium market update: What’s ahead for prices and key catalysts to watch

Given strong demand-side dynamics, and little supply-side expansion to compensate, Benchmark Mineral Intelligence forecasts the market is likely to see higher prices moving into Q3, and ultimately H2 2021.

“Now that hydroxide has regained a price premium to carbonate within China, we anticipate this to remain the case for some time, especially given the strong NCM/NCA cell production outlook as we start to see more uptake of high nickel cathode chemistries in the industry,” Miller said.

For CRU, contract prices will continue to move higher reflecting spot price gains from earlier in the year.

“We expect spot hydroxide prices to remain at a premium to carbonate in Q3 due to strong demand and tighter spot supply,” Jeary said.

Speaking about factors for investors to keep in mind in the next few months of the year, Miller said meeting development targets, expanding production, and investing in new assets are key factors to watch for any lithium player.

“These factors will ultimately determine the lithium incumbents of the future,” he added.

For Jeary, government subsidies and OEM pledges will be important in determining EV uptake. “Any announcements related to mine expansions or restarts will also be important for determining supply over the next few years.”

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

Lithium Market Outlook Cover

What’s In Store For Lithium?

 

Find Out With Our FREE Outlook Report That Contains Exclusive Information Not Found Anywhere Else!

 

Grab Your Report

The post Lithium Market Update: Q2 2021 in Review appeared first on Investing News Network.



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