Rising Lithium Prices: Inflation Phenomena or a Tighter Market?

Source: signumBOX, Daniela Desormeaux (6/28/11)

"The 20% increase is in line with the behavior of primary commodities."

signumBOX, Daniela Desormeaux

In the past two weeks, FMC and Chemetall announced a price increase of 20% for all lithium chemicals products, which include lithium carbonate (mainly used in rechargeable batteries) and lithium hydroxide (used in lubricating greases and batteries). According to both companies, the main reason behind this price increase was higher raw materials costs.

The rise in commodity prices is merely result of the recovery of the economy, with positive and negatives cycles within the process. According to the IMF, commodity prices have risen around 29% in 2011, mainly due to higher energy-related prices (+31%); agricultural and other raw materials prices (+29%), food prices (+25%) and metal prices (+22%) have also increased.

With this background, we can see that the 20% price increase carried out by two of the four main lithium players is in line with the overall behavior of primary commodities.

Anyway, in the short term, one would observe a mismatch between the supply and demand of lithium. This could lead to a situation of tightness in the market if lithium demand grows faster than installed capacity. Nevertheless, this situation is not likely to be sustainable over time, as major producers have already announced their expansions plans and because new production capacity is going to be added in the coming years from new companies that are currently developing projects in Argentina, Australia, Canada, China and likely in Chile.

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