08 Apr Daniela Desormeaux, CEO of Signumbox and Director of Cesco: “The segment that will be most affected by the coronavirus and that will have the most impact on the demand for lithium is the electromobility”
Chile is the second-largest producer of lithium chemicals worldwide, after China. Lithium carbonate, lithium hydroxide and other compounds are used in multiple markets, such as healthcare or the automotive market: being considered by many to be the white gold of the mining industry, essential to boost electromobility, thanks to its use as a cathode material in rechargeable batteries.
For 2019, SignumBOX estimates that global demand for lithium chemicals would have reached between 285,000 and 290,000 metric tons, expressed as equivalent lithium carbonate, which meant a growth of approximately 14.8% compared to the previous year, where the lithium carbonate accounted for 47% of global demand.
“The price of lithium carbonate showed a downward behavior throughout the past year, from approximately US $ 13,000 a ton in January to close the year below US $ 9,000 a ton”, explains Daniela Desormeaux, CEO of SignumBOX and Director of the Center for Copper and Mining Studies. The economist explains that this was due to an increase in mineral supply between 2018 and 2019, in addition to a strong increase in the production of spodumene concentrate in Australia. “These are average prices, which consider different types of products and grades, therefore, there is great dispersion in these prices,” she says.
-While China is managing to contain the advance of the virus, it has advanced in other markets such as Europe and the United States. How will this affect the global demand for lithium carbonate? How will this hit Chile in particular?
The demand for lithium chemicals will be adversely affected by the spread of the virus around the world and by the measures being taken to control it. If we look at its applications, in virtually all uses will have some negative impact, but the segment that will be most affected by the coronavirus and that will have the most impact on the demand for lithium is the electromobility. Currently more than half of the demand for lithium corresponds to batteries, and of that percentage, 70% is used in batteries for electrically powered vehicles. The virus situation will delay the entry of new models, but it will mainly affect the purchase of this type of car. Before the virus situation, we were projecting growth between 10% and 14% for this year for global lithium demand. At that time, the main source of uncertainty was the trade war between China and the United States. Given the current situation, we have lowered our growth estimate for this year to a range of 4% to 6%.
It is also important to comment that not only the demand will be negatively affected, but also the supply. China is the world’s leading producer of lithium and its productive capacity has been affected. We hope that by the second half of the year the normal production level would resume before the virus situation since the long-term fundamentals are solid.
-In the event of an eventual stoppage in the tasks that produce lithium in Chile, how could the price of lithium carbonate vary in this context?
If we only consider the effect on demand, the impact on lithium prices will obviously be negative and we would see further falls in the prices. However, we will also see an effect on supply. We believe that this year the supply could even be less than the supply in 2019, which will avoid a price crash. However, it is still too early to know if this lower supply will compensate for the lower demand, therefore, the evolution of prices for this year is quite uncertain.
– Have measures been announced by China to stimulate the electromobility market?
The focus in both China and the world today is to control the virus. With regard to electromobility, we see that the long-term fundamentals remain. The main “driver” of electromobility is climate change, and although this topic is not a priority today, it will remain so once we get out of this. That is why in the long term we maintain our growth projections for the battery industry in general, and for lithium and other battery materials in particular.
-What can we expect from the different alliances that had been formed to promote the development of new lithium batteries? Will there be considerable delays?
There will indeed be delays. We have already seen announcements of the closure of temporary works by some battery manufacturers in the United States. However, we do not believe that the plans and agreements that have been signed between battery manufacturers and automotive companies can be compromised by this situation, since they obey to long-term vision that is related to the development of technologies to cope with climate change.