VIDEO-How the changing lithium scenario will affect the Southern Cone

Continuing price drops are forcing lithium producers to navigate growing demand and increasing pressure for supply, but also to develop innovative methods that help boost efficiency and sustainability.

According to Shanghai market indices from Wednesday, the lithium price hit a new low of 90,000 yuan per ton, down from 100,000 yuan per ton in June, equivalent to a decline from US$13,700/t to US$12,300/t.

At the end of last year, prices were 80% lower than in 2022.

Jaime Alée, president of ESK Consulting, told a webinar titled The Changing Lithium Scenario in the Southern Cone, which was hosted by BNamericas on Tuesday, that prices will remain between US$12,000/t and US$13,000/t in the long term, leading to a decline in the profitability of global sales of both lithium carbonate and hydroxide from around US$23bn in 2022 to less than US$10bn this year.

Meanwhile, output is expected to increase from around 800,000t in 2024 to more than 1Mt in 2025, that is, “as production increases, the price will continue to fall,” said Alée, who warned that this situation could lead to companies delaying some projects as they wait for a new price rise.

However, demand will remain stable due to the booming markets for electromobility, stationary batteries for renewable energy plants, computers and others.

To ride that wave, producers and investors evaluate direct lithium extraction (DLE) technologies that would ensure rapid and efficient production, while facilitating social and environmental sustainability.

Despite the lower prices, “the perspectives within the framework of the energy transition indicate that lithium is essential for electrical feasibility and there will be a deficit,” Fernando Patzy, manager for the Andean region at NGO Natural Resource Governance Institute (NRGI), told the webinar.

DLE technologies are preferred as production times become more important in the face of intensifying competition, since the technique of using evaporation ponds implies longer times to reach production "against the two weeks offered by some DLE technologies," Alée said.

But DLE technologies still lack maturity and proven experience in Southern Cone salt flats, so Patzy believes that their incorporation will be gradual and in principle be complemented with evaporation ponds, at least in active operations, since “each salt flat is specific and the same technology cannot be applied to all of them.”

Chilean producer SQM, in alliance with state miner Codelco, will introduce DLE technology over the next decade to extract in the Salar de Atacama.

Trends and alternatives

Patricio Ruz, head of non-metallic processes and lithium at engineering firm Ausenco, told the webinar that attention should be focused on the business model and the characterization of a salt flat before evaluating an extractive method to ensure a profitable option is implemented.

He also warned of changes in the market after a fire broke out in a South Korean lithium battery factory, belonging to Aricell, at the end of June.

According to Ruz, the incident was caused by mishandling of lithium hydroxide, which "is more reactive than carbonate," and therefore, the trend will be toward carbonate, as it is more "manageable in terms of thermodynamics and offers greater chemical, electrochemical and physical-chemical stability."

Alée said technological progress will allow energy density of lithium batteries to double, so it's unlikely they will be replaced by alternatives like sodium batteries. Furthermore, “millions of dollars have already been invested in lithium battery plants” around the world.

Transparency and geopolitics

Patzy said that players must consider geopolitical factors and price volatility before making investment decisions, since unlike other commodities, lithium is produced in few countries and still has relatively few buyers.

“The market is oligopolistic and pricing mechanisms are still being sought in the main financial centers.”

In this scenario, China plays a predominant role in the purchase and processing of lithium, but there are efforts to change the configuration of trade, with the entry of new projects in countries such as Argentina or Brazil, in addition to strong efforts by the likes of the US, Canada, Japan, Saudi Arabia or the EU to guarantee supply chains from the Southern Cone.