Battery-grade lithium prices are poised to increase 50% within a year, as lagging production in China and South America continue to tighten the market, Rystad Energy forecasts.   

According to the Norwegian consultancy, supply of lithium salts will remain tight through “at least” the first half of the year. It says producers appear reluctant to sell significant volumes on the spot market, with supply constraints and the ongoing logistical issues caused by the pandemic creating bottlenecks in the trading market for lithium salts.

Add to that the positive outlook for lithium iron phosphate (LFP) battery demand, which typically feeds on lithium carbonate, and prices are set to continue climbing. In fact, lithium carbonate prices are expected to trade at a higher premium over the price of lithium hydroxide in early 2022. However, the unusual market trend is set to gradually narrow after seasonal supply bottlenecks ease in China and a ramp-up plan in South America materialises, Rystad says.

In a new analysis, it estimates lithium prices will increase from the record high $35,000/tonne traded in Asia (cif) currently to $50,000/t in the second half of 2022. By January 2023, the battery metal will be trading at roughly $52,500/t, Kallanish understands.

Lithium futures for February traded at an intraday high of CNY 418,500/t ($65,876/t) on 10 January on the Changzhou Zhonglianjin exchange platform. On 31 December, the contract price was traded at CNY 366,000/t. There has been some correction since then, with the futures dropping to CNY 345,000/t on 12 January.

The platform is seen as a “fresh new driver for China’s lithium market,” according to Rystad’s senior analyst Susan Zou. “The future contracts have driven sentiment in the market to some extent, especially over the past two months. This has contributed significantly to the current momentum in lithium prices in China and made trader-suppliers who have attempted to destock in January hold back from selling for now."

Rystad suggests battery-grade lithium carbonate, ex-works China, rose nearly 43% month-on-month to CNY 300,000/t in early January. Battery-grade lithium hydroxide, also ex-works China, increased from CNY 192,000/t in early December to CNY 290,000/t early this month.