Lithium spodumene to ease to US$1,800 by 2024: Office of the Chief Economist

Lithium spodumene prices are projected to average US$2,235 a tonne in 2022 and ease to around US$1,800 by 2024 according to the Australian government’s commodity forecaster, the Office of the Chief Economist (OCE).

The OCE publishes its Resources and Energy report on a quarterly basis and tends to be quite conservative with its price forecasts (don’t expect any $380 oil warnings like JP Morgan). 

Let’s break down some of their insights, commentary and outlook for lithium.

Lithium quick facts

• Australia is the world’s largest lithium explorer

• Australia produced 46% of the world’s lithium in 2020

• Australian lithium exports will more than double over the next 5 years

• Demand for lithium batteries accounted for almost 75% of all lithium used in 2021, expected to reach around 90% by the end of the outlook period (2027)

EV demand slows (but still strong)

Global EV sales fell -1% in the March quarter, from record sales in the December 2021 quarter.

Lower sales in China, Europe and the US due to macroeconomic challenges, vehicle delivery delays and production cutbacks were to blame, according to the report.

Sales have "rebounded strongly" in May, as supply chains recovered and demand improved.

In the short-medium term, the OCE expects global EV sales to continue to grow strongly, "albeit at slower rates than the record growth in 2021".

Source: Office of the Chief Economist, Resources and Energy Quarterly (June 2022)

Demand and supply

Global lithium demand is forecast to increase from 555,000 tonnes of lithium carbonate equivalent (LCE) in 2021 to 677,000 tonnes in 2022, up 22%.

The OCE forecasts demand to rise by over 40% in the next two years, reaching 947,000 tonnes by 2024.

World output is estimated at 525,000 tonnes of LCE in 2021, and forecast to reach 655,000 tonnes in 2022 and 944,000 tonnes in 2024.

"Total supply from mine and brine operations is currently insufficient to meet demand. While project development is underway, it will take time to close the supply gap," the report said.

Upside risks

The OCE acknowledged "considerable uncertainty" around new supply due to factors including long lead times for lithium mine and bring operations and delays for bring large projects into production.

Another factor that has buoyed current lithium prices is the "push by refiners and battery producers to build up stocks, due to concerns about global supply chains".

Though, "if these concerns ease, prices could moderate more rapidly over the next couple of years."

Source: Office of the Chief Economist, Resources and Energy Quarterly (June 2022)