Lithium – Price volatility to continue into 2019

Prices for lithium hydroxide and lithium carbonate are expected to remain volatile according to Brisbane based lithium producer Orocobre.  According to company management, its operations in Argentina have seen prices for their lithium drop up to 40% over the last 6 months, creating short term difficulty for financing new industrial projects.

“We continue to see and expect volatility in the market,” he said. “The market is changing significantly on the demand side and on the supply side.” 

The same sentiment was shared in December 2018 by Bernstein analyst Paul Gait, who claims that the margins experienced by lithium producers in 2018 were far too high to maintain a sustainable supply chain.

“Despite the price fall … lithium prices still imply astonishingly high returns on any investment in lithium production capacity,” he said.

“Current lithium carbonate prices are in the range of US$10,000-15,000 per tonne depending on the exact price series one selects to look at, but according to our analysis, these prices would still imply IRRs of between 46% and 74% based on our representative list of 20 lithium projects from around the world.”

Gait believes a fair long term price for lithium of $8000/tonne would generate the appropriate level on investment whilst maintaining sufficient demand levels. 

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