Suppliers Have More Lithium Than EV Manufacturers Currently Need

The lithium industry — essential for the production of battery electric vehicles — has run into a problem. It’s currently amassing more of the metal than it needs. Despite automakers like Tesla suggesting there will be upcoming global shortages of metals like copper, nickel, and lithium, the only element that battery suppliers appear to be truly desperate for is cobalt, which is largely the fault of where and how it’s mined ( the Congo, often by children).

Demand for the brittle, bluish metal skyrocketed this year, but not lithium. The latter metal’s global supply currently exceeds demand by about 5 percent, according to data from Canaccord Genuity.

Reuters attributes the downfall in demand to electric vehicle sales in China. The People’s Republic has been doing most of the heavy lifting when it comes to EVs. Government programs have encouraged both the production and purchase of EVs, making it their most-viable market. But China has backed off the subsidies in recent months, hoping to allow electric startups and customer preferences to stand on their own two legs, or fall. While automakers stayed put, customers have been leaving in droves. EV sales fell by nearly a third in September, making it the segment’s third consecutive monthly decline.

Part of that is due to China’s souring economy, though the way the nation handled EV adoption also played a factor. Confusing emission laws, unevenly adopted between regions, spooked consumers away from the market. It’s also forced dealers to price less than predictably. A surplus of product forced heavy discounting over the summer, causing a momentary blip in sales. However, the country saw vehicle sales drop more than 12 percent in the first six months of 2019 and that looks to be the trend for the rest of this year.

From Reuters:

A global average of [lithium] prices is down more than 50 percent since the start of 2018, according to Benchmark Mineral Intelligence, a metals pricing provider that is hosting an EV supply chain conference this week in Los Angeles.

“Current market conditions are challenging,” Luke Kissam, Albemarle’s chief executive officer, said last week.

Despite the weak data, analysts and executives expect a rosy future when they look out 10 years.

Benchmark’s Simon Moores called the lithium oversupply an “air pocket that detracts from the building wall of demand,” and noted much of the excess white metal on the market is for so-called technical grade, or the kind that goes into smaller consumer electronics such as stopwatches.

Moores believes the high-grade lithium door will swing open in 2024, once more automakers begin manufacturing electric cars. Other analysts are less inclined to believe it’s smooth sailing from here.

“The future supply of battery-quality chemicals is very much in doubt,” worried Joe Lowry, an independent analyst, questioning the industry’s ability to produce over 800,000 metric tons by 2025 — twice its current capacity.

However, that’s a problem for tomorrow. Today’s lithium providers are trying to cut costs and appease investors hungry to make money off the popularization of EVs and rapidly-multiplying consumer electronics. This could create more issues down the road as today’s solution becomes tomorrow’s headache.

[Image: Sergii Chernov/Shutterstock]