Lithium squeeze will drive up prices as electric vehicle sales accelerate

Australia is the world’s largest producer of lithium and accounts for around 30 percent of the known resources. Most of the lithium in Australia, however, is exported as spodumene concentrate, rather than the higher quality refined products suitable for battery cells.

Lithium producers in Australia and around the world are rushing to increase capacity – reopening shelved mines and developing new projects – leading to an estimated 36% increase in lithium supply in 2022, according to Bank of America.

However, the increase will be insufficient to keep pace with demand in the short term. “Therefore, we expect spot prices to remain high,” Gabb said.

Morgan Stanley analyst Rachel Zhang said the squeeze in lithium supply is expected to continue through the first half of 2022 before some ‘slack’ is possible in the second half with the arrival on the market. new supply market. “That said, given the normally better lithium consumption in the second half of the year, a tight market equilibrium is still likely at this point,” she said.

Despite the need for more lithium mines to electrify the transportation sector, which currently accounts for about a fifth of global warming greenhouse gas emissions globally, community opposition to new mines being built in due to concerns about environmental damage could restrict supply even further.

Rio Tinto, Australia’s second-largest mining company, faces escalating backlash against its plan to develop the $ 2.4 billion ($ 3.3 billion) Jadar lithium mine in the west from Serbia. Last month, activists took to the streets of Belgrade in protest, prompting local authorities to suspend the allocation of land for the project.

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