Modern Mining July 2023

the evolving commodity supply strategies of major economic powers, we think so. In fact, the US is not the only one securing its raw material supply chains. All key players of the last Cold War – the US, EU & Japan – have recently identified commodities they regard as ‘critical’ inputs for stable economic growth. They’re now protecting all sources, mainly by acti vating old trade alliances (The Geopolitics of Critical Minerals Supply Chains, J. Nakano, 11-Mar-2021). And which commodity has been flagged as ‘critical’ by all three? Lithium. It seems the imperative to de-carbo nise Auto World persists, even in a Cold War. Industry perspective At about 650 kt, the global lithium market is just 1-4% of the size of its higher profile global metal market cousins of copper and aluminium. Applying a spot price of $45 k/t, this little metal market is currently worth about US$30bn (i.e. 15-23% of copper’s/ aluminium’s). Over the last 20 years, the global lithium trade has expanded at an extraordinarily strong rate of 20%/ yr, driven generally by the rise of lithium-ion battery bearing consumer goods, and more recently by electric vehicle batteries (now >80% of total demand). Lithium is predominantly derived from two mined sources: 1. hard rock (primary spodumene, mostly Australia; 61% of total, 2022 estimate); 2. brine (sedi mentary deposits of Chile; 39%). Recent high prices have spurred investment in new, higher cost sources of China (brine & lepidolite), the US and Argentina (brine). Over the medium- to long-term, we expect battery scrap to emerge as a significant Li-unit source, reducing demand for mined supply. General price outlook Again, key prices for lithium products bounced off a $25/t-floor in late April, after falling by over 70% vs. November 2022’s peaks of above US$80k/t. The battery feedstock’s sell-off has reported to spodumene prices too, down 15-20% to below US$4,000/t-level by mid-May.

From here, we see three short-term bullish price drivers: 1. again, emerging geo-political push to secure strategic lithium reserves, 2. project delays, on now sharply lower spot prices, 3. Chilean gov ernment’s push to take a greater direct share of its national mining industry profits (restricts local supply growth; bullish global price). 

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