Lithium Shortage Weigh on EV Makers’ Plans Despite Prices’ Rollback
Jeopardized by a possible shortage of lithium for electric vehicle batteries, automakers are trying to secure supplies of the once-obscure “white gold” amid a politically and environmentally strained race from China to Nevada to Chile. Recent commentary from the U.S. International Energy Agency (IEA) provided a good overview of the state of lithium price bulls. Despite plans to significantly increase lithium production, the electric vehicle industry could face lithium (and cobalt) shortages unless substantial additional investment is made in the production of these critical metals.
Parent company of General Motors Co. and China's BYD Automobile Co. Ltd. Sourced directly and bought stakes in lithium miners, a rare move for an industry that relies on outside suppliers of copper and other commodities. Others invest in lithium refining or recycling the metal from used batteries.
According to Bloomberg, Argentina will use lithium produced locally by Livent Corp. The purchase is used to produce cells and battery packs at a new factory scheduled to begin operations in September. The ongoing purchase is part of an agreement signed earlier this year between lithium-producing Catamarca province and state-owned energy research firm Y-TEC, under which Livent will supply lithium to UNILIB, the region's first battery and battery development company.
On June 28, ExxonMobil Corporation (XOM) entered into an agreement with water treatment and recycling chemical manufacturer TETRA Technologies, Inc. (NYSE: TTI ) to develop more than 6,000 acres of lithium-rich salt water deposits.
On June 29, Bolivia signed agreements with Russian state-owned company Rosatom and China's CITIC Guoan Group to tap its largely untapped lithium resources. Rosatom and CITIC Guoan are expected to invest a combined $1.4 billion in the effort.
On June 30, Bloomberg reported that commodities giant Glencore plc (LN: GLEN) is close to financing a lithium project in Argentina being developed by French mining company ERAMET S.A. (ERMAY) and China Tsingshan Holding Group. In return, Glencore is expected to sign an offtake agreement for the lithium produced.
However, having said that, lithium prices seem to stall. After hitting new highs in 2022, lithium prices aren’t going anywhere in 2023.
Will they recover if lithium demand continues to grow? According to the “Resources and Energy Quarterly”: In June 2023, lithium will peak in November 2022, and the average price of spodumene concentrate (SC6%, CIF China) and lithium hydroxide (shipped to China) will be USD6,100 per ton respectively and USD 78,950 per ton, respectively.
The Shanghai metal market observed that the price of spodumene concentrate (SC6%, CIF China) was US$4,030/ton on June 30, and the trading price of lithium hydroxide on the London Metal Exchange (LME) was US$46,900/ton on the same day. This leads us to the conclusion, that going forward, lithium price divergence between places where it is in the most demand by the manufacturers and rest of the world – will only be extending. The price arbitrage opportunities are limited by scarcity of commercial long-range vessels.
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