Lithium glut fears tempered by optimism over surging demand

Singapore

WARNINGS of a lithium glut may be premature. For one thing, doomsayers assume all the lithium in brine or hard rock deposits will get processed, but that's not the case, said Jay Roberge, partner and managing director at Tehama Capital Corp, a Vancouver-based merchant bank.

"There's no shortage of lithium in the world, but the concern is processing it and developing it into lithium carbonate, lithium products and lithium metal," Mr Roberge said in an interview. "Not all lithium projects that will have a decent grade of lithium are necessarily economical, because you have to be able to process the lithium into the end-product."

Surging demand for lithium in batteries for electric vehicles has caught the attention of investors in the past two years. Still, more output may be on the way. Morgan Stanley cautioned in February that excess supply will come as soon as next year, while Wood Mackenzie Ltd has said supply is likely to outpace demand more aggressively, spurring a price decline from 2019.

While there's an oversupply of mined product which will grow in 2018 and next year, refined products remain relatively tight considering all the variants produced and consumed, according to Roskill Information Services Ltd.

Miners have contested claims of a glut. Canadian company Nemaska Lithium Inc sees a very tight market in the next four to five years and reports of oversupply are "grossly overstated", chief executive officer Guy Bourassa, said on Wednesday. Mass acceptance of electric vehicles will build through 2019 to 2021, spurring demand for battery materials, said Carlos Vicens, chief financial officer at Neo Lithium Corp, which may start production in 2021.

Roskill sees double-digit expansion in lithium demand given the momentum in electric vehicles, with batteries accounting for more than 50 per cent of consumption in 2018 or 2019 and rising to more than 90 per cent by the mid-2020s, according to managing director Robert Baylis. Last year, lithium demand expanded about 17 per cent, outstripping supply, Sociedad Quimica y Minera de Chile SA, said in its annual report. BLOOMBERG