Batteries leave lithium hydroxide facing tight supply

The focus for the lithium industry has generally been on lithium carbonate.

It is, after all, the number one manufactured product in the industry, used in industrial markets, pharmaceuticals and the rapidly growing battery sector. In terms of production, the lithium carbonate market is roughly 2.5 times larger than its close relation, lithium hydroxide.

Previous supply expansions in the lithium industry have been heavily weighted towards increasing carbonate output rather than hydroxide. This was most evident when lithium’s exploration sector boomed in 2009 and most new projects centered their efforts on developing the next generation of carbonate supply.

Hydroxide was overlooked by many.

Fast-forward to the present day and the industry could face a shortage of hydroxide supply by as early as 2015.

Lithium hydroxide is primarily used as an industrial lubricant in the form of grease. But it is also used as an active cathode in batteries, much like its carbonate counterpart.

In fact, Tesla Motors’ Gigafactory is planning to use lithium hydroxide in its 500,000 unit-per-year super-plant which alone could increase demand for all lithium chemicals used in batteries by much as 50%.

Benchmark Mineral Intelligence has spoken to players in the market who believe this growing consumption from the battery sector could create a supply deficit in the market as early as next year.

In bullish scenarios, lithium hydroxide’s price could subsequently increase by as much as 30% in 2015.

Should these forecasts come to fruition, it could see market prices exceed the all-time highs of 2012, when prices reached $8,000/tonne.

This is a classic case of niche, specialty products used in emerging markets. If analysing the lithium market as a whole, one would not be too concerned over supply availability. But when you break it down to the actual products or raw material grades that can only be used in specific markets like batteries, the situation becomes more precarious.

2015 is likely to bring more downstream activity in the last two years combined. And should electric vehicle battery production move to the next level, as is looking likely, next year could well spark the whole industry back into life.