Prices of lithium, a metal that is key in the electric vehicles (EV) sector especially for the batteries, are likely to rule high in the short-term. But they will not result in any large spike to rise to the highs witnessed in 2016 and 2017, a Webinar on “Global Lithium Outlook” was told.

Prices of lithium, a metal that is key in the electric vehicles (EV) sector especially for the batteries, are likely to rule high in the short-term. However, this move will not result in any large spike to the highs witnessed in 2016 and 2017, a Webinar on “Global Lithium Outlook” was told.

Though the outlook for lithium prices is favourable, the metal’s use in EV batteries featuring various cathode chemistries will help insulate lithium demand from technological advances. It will coincide with changing preferences for cathode chemistries, said experts at the outlook “Key themes for fast-growing, fast-evolving sector”, held by Fitch Solutions Country Risk and Industry Research (FSCRIR).

Surge in prices

Key analysts of FSCRIR handled various queries at the Webinar on the outlook for lithium that has witnessed a 91 per cent price surge since the start of this year to 89,000 Chinese yuan ( ₹10.25 lakh) a tonne.

FSCRIR analysts told the Webinar that it is unlikely that perceptions of over-development currently could lead to lithium oversupply in the near-term, as mine development takes several years from conception to operationality. Moreover, growth in lithium consumption is expected to outpace current supply developments. This is supported by strong government support in major economies to promote EVs and large-scale energy storage systems that will more than keep up with supply, the analysts said.

Hydrogen cell tech

Demand for lithium hydroxide will exceed that of lithium carbonate in future as it is the key lithium chemical utilised in preferred battery cathodes. While hydrogen cell technology is picking up, it would require another 10 years to flourish. Also, it would take a longer time for hydrogen fuel cell vehicles (FCVs) to pick up compared to EVs, the analysts said.

Hydrogen FCVs will not pose a significant threat to lithium demand over the next decade due to lack of supporting refuelling networks. The Fitch analysts, however, saw limited scope for alternative technologies to gain market share, at least until 2030.

Though lithium prices will trend higher over the next five years, prices of batteries will decline in the coming years due to increased economies of scale in the battery manufacturing segment, rising manufacturing efficiency and additional capacity.

Resource nationalism’

Strategic supply is a growing theme in the lithium sector and it is experiencing increased interventions by governments in the name of “resource nationalism”. This could increase further and would be either to secure the strategic material or boost domestic production or benefit from it by increasing taxes or controls.

The interventions will be in different forms but almost all lithium producing nations would be involved in measures such as supporting battery production (Australia, US and Canada), review of contracts and hike in taxes (Chile, Mexico and Argentina).

Markets in developing countries will attempt to reduce their dependence on China and this will likely result in the entire EV battery value chain changing significantly in the coming years, the analysts said.

India’s potential

FSCRIR analysts feel that though India announced the discovery of lithium reserves in Karnataka’s Mandya district this year, actual mining, if at all takes place, will take years. Exploratory work has also been done on extracting lithium from brine pools in Rajasthan and Gujarat besides the mica belts of Odisha and Chhattisgarh.

The total reserve at Mandya was only 1,600 tonnes and this indicated that India would continue importing lithium in the long-term. They also pointed out the agreement signed by the newly-formed public sector firm Khanij Bidesh India Ltd, with an Argentinian firm to jointly prospect lithium in the Latin American nation with 17 million tonnes of lithium reserves.

Khanij Bidesh was set up in 2019 as a joint venture between National Aluminium Company Ltd (Nalco), Hindustan Copper Ltd (HCL) and Mineral Exploration Company Ltd (MECL) to ensure a consistent supply of critical and strategic minerals to the domestic market.

Battery recycling

In the longer term, battery recycling will be a viable alternative to mining lithium supply. In the near term, the growth of the battery recycling industry will continue to be limited by cost and policy challenges.

Currently, the recycling process has not been standardised to increase cost-efficiency and make companies make profits. More technological advances will be required within the next decade to make recycling a sustainable source of battery-grade lithium.

The analysts said that investments will continue into recycling research and development ahead of the surge in spent batteries from EVs.

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