A conversion deficit is building up in the lithium market that is part of the battery metals supply chain for electric vehicles and energy storage.
Even if there is sufficient lithium raw material, hydroxide conversion capacity is limited. Lithium hydroxide is generally preferred to lithium carbonate with cathode types designed to use it, Brian Hartmann, associate partner at research firm McKinsey & Co said.
Lithium raw material stockpiles may develop while processing capacity catches up. If there is not enough lithium hydroxide, battery makers are likely to move to lithium carbonate, he said at a battery metals conference in Perth.
NMC 811 cathodes being developed improve energy density in lithium-ion batteries, enabling electric vehicles to increase their range. They use considerably less cobalt and more nickel than current cathode models such as NMC 111.
"Timing challenges in the value chain are likely to keep cathode prices high," Hartmann said. This confirmed the pricing view of Ken Brinsden, chief executive of lithium concentrate developer, Pilbara Minerals.
Another speaker at the conference said there is unlikely to be enough conversion processing capacity in the market despite significant investments being made. He estimated that the lithium chemicals market will grow to $8.5bn in 2025 from $2.5bn in 2017, depending on price movements.
Gross margins in lithium carbonate and hydroxide production are in the range of 30-50pc compared to 15-20pc in the lithium mining environment.
There is not sufficient hydroxide processing capacity in the world and encouraged lithium mining locations such as Western Australia to invest in processing capacity to provide a stable supply of downstream lithium outside of China, he said.
