Lithium expected to remain under pressure in near term

Lithium prices are expected to remain under pressure in the near term with a recovery not likely until after 2020, Australia's Department of Industry, Innovation and Science said in its June Resources and Energy Quarterly Review.

It expects lithium hydroxide prices to fall by around 15pc in 2019 to just over $14,000/t on oversupply and growing inventories, while lithium concentrate prices are likely to face a larger period of oversupply this year and next year.

"The current lithium oversupply is a side effect of miners attempting to position output to meet expected rapid rises in future demand. Demand growth is expected to outstrip supply by 2023," the review said. This is when electric vehicles (EVs) are expected to become less expensive than internal combustion engine vehicles.

The review said lithium supply chains are evolving rapidly with a shift in the market towards the use of hard-rock lithium deposits, which are benefitting from water and environmental problems associated with lithium brine deposits in South America.

Lithium recycling will start to substitute mined production in the longer term, but large-scale recycling is not expected to be a factor much before 2030 when EV and energy storage batteries start reaching the end of their lives in large quantities, it said.

Commenting on Australia's lithium industry, the review said the country's production is expected to increase to 335,000t of lithium carbonate equivalent by 2020-21 from 272,266t in 2018-19. This will be aided by an upgrade of Greenbushes, the world's largest hard rock lithium mine, and the ramp up of new mines. Rising production and value-adding refineries are expected to boost exports to around A$1.4bn ($1bn) by 2020-21.

"Australia's lithium exports face a mixed outlook with prices falling, but with new refinery capacity also adding value over time," the review said.

Australia has around 17pc of global lithium reserves and is the biggest exporter of lithium products.