Lithium price spikes key to chemistries
The price of lithium will be key in determining battery chemistries, according to market participants. Sustained high prices would cause use to shrink, although few expect lithium to be replaced or for its use as a battery component to fall.
According to Prabhakar Patilformer, the chief executive officer of LG Chem Power and advisor to the battery industry, "lithium ion will be the dominant technology" for the electric vehicle (EV) market for the foreseeable future.
So while lithium-ion is set to keep its leading role in the sector, there is an open question as to which battery li-ion chemistry automakers will use, with the prices of lithium chemicals perceived as a key driver of strategies.
The role of futures markets and governments
Future prices should help mitigate the persistent transfer of risk that has taken place in the lithium supply chain due to wild price fluctuations and fixed price contracts, according to one trade executive.
The recent volatility has not favored one side or the other but has made business difficult overall, the source said. In this sense, the development of futures markets for lithium products could act as a useful tool for all parts of the value chain, thereby reducing the risk profile of the industry.
At the same time, governments will have an important role to play in the industry to support the establishment of new supply flows.
To address a shortfall as severe as the one in lithium, government intervention will be necessary, one industry analyst said at the conference. This could be in the form of tax incentives or direct support, as was the case in boosting US oil and gas production during the shale boom.
State action is needed also in light of the strategic role that lithium has at a geopolitical level, sources said.
Reality supporting bullish sentiment for EVs
The transition to electric vehicles (EVs) is real and here to stay, providing fundamental support to the burgeoning lithium industry, panellists in Las Vegas said.
“Now that we’re at a 10% penetration rate [of EVs], it’s really clear that this is the direction in which consumers and the market are going,” according to Jennifer Fung, head strategist at Pala Investments.
Attendees said the striking level of growth in production and sales for EVs in both the key markets of Asia and Europe suggests that the transition towards a future powered by electric transport is indeed in progress and not a temporary hype in corporate strategies and consumer choices.
Lithium producers need to be mindful of ESG goals, sustainability
Given the increased scrutiny and the jurisdictions where they operate, lithium producers should conduct impact studies sooner rather than later. They can learn from past mistakes by other extractive industries, conference participants said.
Sustainability of the supply chain will also be a key concern for end users. Daniel Jimenez, partner at iLi Markets, called sustainability concerns “an enormous threat” to the adoption of EVs that use lithium.
China seen as tough competitor in the technology race
Western companies will have a hard time keeping up the pace of innovation that the Chinese industry has shown over the past few years, according to some panellists.
“When it comes to innovations, nobody can beat the Chinese - they are far ahead of the rest of the world in terms of technology”, Ken Hoffman, co-head of EV battery materials research at McKinsey & Company, said during a panel discussion on battery chemicals.
Hoffman gave as an example the nickel cobalt manganese (NCM) 811 battery, which in 2019 appeared already in 20% of Chinese EVs and for which growth in market share is predicted until 2025.
Other prospective developments are lithium metal solid-state batteries, which are under development at several companies including Ganfeng Lithium.
“It is a big challenge for Western companies to keep up, and Tesla has done a good job doing this,” Hoffman said.
Sofia Okun and Thorsten Schier contributed to this article.