Second lithium supply wave seen in early 2020s

Lithium prices are expected to remain under pressure in the short term, but "a second wave" of lithium supply will be needed in the early 2020s, according to the March edition of Australia's Resources and Energy Quarterly review.

While the downward trend is set to continue as inventories build further to cause a mine supply surplus until 2022, refining and chemical conversion could then emerge as significant bottlenecks, the review said.

In its commentary on prices, it said lithium hydroxide is expected to decrease to $15,600/t in 2019 from $16,139/t in 2018, falling further by 2021, before recovering to around $13,700/t in 2024. Spodumene prices are expected to fall to around $466/t in 2024 from $783/t in 2018.

It expects production of spodumene/lithium concentrate to flatten over the next two to three years as ore prices drop and suppliers face a choice between selling at a loss and curtailing output.

"However, rapid growth in demand is expected to overtake supply and produce a deficit by the early 2020s with a second wave of additional supply entering the market in response by 2024," the review said, adding that increased recycling of lithium-ion batteries will be important in meeting demand after 2022.

Australia's lithium output is expected to increase over the next few years, rising to 419,000t of lithium carbonate equivalent in 2023-24 from 251,000t in 2017-18. Export revenues are expected to rise to around A$1.5bn ($1.06bn) by 2023-24. Output in Chile, which has the largest reserves, is expected to slow in the near term because of project financing challenges and water issues. China's lithium production from salt lakes will continue to be a factor as it has become more reliable than initially anticipated.