Despite Soaring Demand, Lithium Prices Could Crash In Half

At the end of 2017, Bloomberg Business-week published an article titled ‘We’re Going to Need More Lithium,’ which outlined the challenges currently facing the global lithium industry as demand for the rare earth has surged over the past few years thanks to a spike in demand for electric vehicles, which are now competing with laptops and smartphones for lithium-ion batteries.

A Tesla Model S uses more lithium in its batteries than 10,000 smartphones according to estimates by Goldman Sachs.

According to Bloomberg New Energy Finance, electric car production is expected to increase more than 30 fold by 2030, which means that the demand for lithium is not going to slacken anytime soon. Estimates vary but as Bloomberg reports, according to analysts at researcher Sanford C. Bernstein & Co., “total investment in new mines, including some for other elements used in lithium-ion batteries, will likely range from $350 billion to $750 billion” over the next 12 years.

The good news is, there’s plenty of lithium to go around. Bloomberg New Energy Finance estimates that production required over the next dozen years will drain less than 1% of global reserves.

Demand for lithium has pushed lithium prices steadily higher (doubling over the past two years) and producers have rushed to take advantage of this. However, this rush to get supply to market will cause the price to half from $13,375 a tonne to $7,332 a tonne by 2021, and then towards its marginal cost of production at $7,030 a tonne thereafter according to Morgan Stanley’s latest in-depth report into the industry.

Lithium prices

According to the report, a copy of which has been reviewed by ValueWalk, as a wall of lithium supply hits the market over the next four years, lithium prices could fall by 45% from current levels, a scenario that is not currently reflected in lithium prices. Prices are expected to decline despite the continued growth in demand for lithium-ion batteries.

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