May 31, 2021

Lithium outlook ‘bright as ever’ - report

Lithium
Electric Vehicles
Energy Storage
Decarbonisation
4 min
Fitch Solutions report shows the outlook for the lithium sector over the next ten years is as ‘bright as ever’ amid fast production and demand growth

The forecast for lithium over the next decade is as “bright as ever” according to a new report from Fitch Solutions and Country Risk highlighting fast production and demand growth.

Energy Storage

The global acceleration towards decarbonisation, the electrification of vehicles and energy storage continues. It provides a backdrop for fast-paced change in a market traditionally dominated by only a handful of participants and opening up many new production opportunities elsewhere in the world.

Lithium

However, the constant technological advancements on both the supply and demand sides pose risks to the market outlook. Fitch cautions that since lithium is now considered a ‘strategic mineral,’ it will likely lead to rising government intervention in its production and sourcing.

The lithium supply landscape will, therefore, evolve quickly and dramatically over the next few years. Fitch forecasts global lithium production will more than triple from 442,000 tonnes of lithium carbonate-equivalent (LCE) in 2020 to 1.5 million tonnes of LCE by 2030.

Strategic Minerals

However, the constant technological advancements on both the supply and demand sides pose risks to the market outlook. Fitch cautions that since lithium is now considered a ‘strategic mineral,’ it will likely lead to rising government intervention in its production and sourcing.

The lithium supply landscape will, therefore, evolve quickly and dramatically over the next few years.

Fitch forecasts global lithium production will more than triple from 442,000 tonnes of lithium carbonate-equivalent (LCE) in 2020 to 1.5 million tonnes of LCE by 2030.

Fitch has, for the first time, also launched lithium carbonate and hydroxide price forecasts. It expects a sharp acceleration in demand for lithium-ion batteries will outpace supply growth, keeping prices elevated.

It forecasts Chinese lithium carbonate 99.5% prices to average $13,450 per tonne this year and at $15,025 per tonne in 2022, and Chinese lithium hydroxide monohydrate 56.5% prices to average $11,950 per tonne in 2021 and $14,300 per tonne in 2022.

Fitch Lithium

Risks to the price outlook include a faster-than anticipated adoption of EVs (upside risk to prices), a faster-than-anticipated advancement of new lithium extraction technologies (downside risk), and a faster-than-anticipated advancement of battery-recycling technology (downside risk).

Fitch forecasts EV sales to drive lithium consumption growth by as much as seven times over 2020 through 2030, while yearly EV sales will grow from 3.1 million to 21.2 million units.

Fitch forecasts the EV sector will account for about 80% of total lithium demand by 2030, compared with between 40% and 45% currently.

For now, China is expected to remain the largest battery manufacturer by a wide margin - accounting for about 80% of installed manufacturing capacity as of 2020. However, other existing manufacturers including Japan, South Korea, the US and Hungary will most likely record a rise in battery manufacturing, Fitch says.

Relatively new entrants, including Germany, Poland, Sweden, France, the UK, Thailand and Indonesia, will also establish themselves as increasingly essential manufacturers.

Green Energy

The rapid rise of a green premium for lithium amid heightened demand for more environment-friendly resources from downstream players is another critical price trend Fitch is monitoring. Another of the analyst’s recent reports considered how lithium extraction techniques are increasingly under ESG scrutiny.  

Currently, only hard rock and conventional brine resources from salars are used to produce lithium at a commercial scale; Fitch estimates about 65% of global output comes from hard-rock lithium mines such as those in Australia, while 35% come from brines in Latin America and China.

However, a slew of new market entrants are working on new extraction techniques such as geothermal brines and sedimentary (clay) deposits, which could upend primary supplies of lithium.

As the development of these new extraction techniques progresses, the industry structure, the shape of the cost curves, and the environmental, social and governance (ESG) considerations will continue to evolve. Providers of more environmentally friendly lithium with lower water usage and carbon emissions will most likely be rewarded.

Rising demand for the most sustainable lithium, coupled with tight supply, means that over-the-counter transactions, offtake agreements and long-term strategic supply partnerships are here to stay in the coming years.

Fitch Lithium Market

Technology

Technological advancements, meanwhile, are at different stages of development, which Fitch flags could cause supply to rise faster than expected.

According to Fitch, these developments will keep the lithium market opaque to some extent and lithium will remain more of a speciality chemical market, characterised by clients requiring specific and often differentiated products and less of a bulk commodity market.

The upcoming development of lithium recycling could also ease some of the lithium supply issues in the longer term. Fitch also notes that the lithium content of the promising next generation of batteries is even higher than the batteries that will be dominating over 2021 to 2025.

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Jun 17, 2021

People Moves: Peter Cunningham appointed Rio Tinto CFO

Rio Tinto
Peter Cunningham
financial planning
Renewable Energy
2 min
Rio Tinto has appointed Peter Cunningham its Chief Financial Officer and he will also join the Board as an executive director

Rio Tinto has appointed Peter Cunningham as Chief Financial Officer (CFO) with immediate effect. Peter, who has been Interim Chief Financial Officer since 1 January 2021, will also join the Rio Tinto Board as an executive director at the same time.

Peter Cunningham appointed Rio Tinto CFO

Peter Cunningham was previously Group Controller and has held a number of senior financial and non-financial leadership positions across Rio Tinto in Australia and the UK. In a career spanning 28 years with Rio Tinto, he has held roles including Global Head of Health, Safety, Environment & Communities; Head of Energy and Climate Strategy; and Head of Investor Relations.

Prior to joining Rio Tinto, Peter qualified as a chartered accountant.

Rio Tinto CEO Jakob Stausholm commented: “I am delighted to confirm Peter in the role and, having worked closely with him for a number of years, I know he is the ideal person to be our Chief Financial Officer. His detailed knowledge of the company and of the financial and non-financial drivers of our industry will be invaluable as we continue to strengthen Rio Tinto.”

Rio Tinto Chairman Simon Thompson added: "I look forward to Peter joining the Rio Tinto Board and know from experience that his deep understanding of Rio Tinto and commitment to disciplined capital allocation will serve shareholders well and enrich our Board discussions.”

Rio Tinto aiming for net zero by 2050

Rio Tinto is aiming to reach net zero emissions across its operations by 2050. Across the company, it is targeting a 15% reduction in absolute emissions and a 30% reduction in emissions intensity by 2030, from a 2018 baseline.

Aluminium is found in everything from cars to phones. But one of the challenges of producing this essential material responsibly is finding ways to decarbonise the process.

Part of the reason is creating alumina – the main ingredient in aluminium – takes a lot of energy, which in turn creates greenhouse gas emissions. New technologies will be essential to helping reduce emissions, but many haven’t been proven. And some not yet even discovered. Rio Tinto is partnering with the Australian Renewable Energy Agency (ARENA)to develop hydrogen energy options and make a positive step towards these goals.

Rio Tinto Weipa

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