The 276% rise in the price of lithium causes changes in supply contracts

Lithium consumers supplying batteries for electric vehicles are seeking longer-term contracts with producers, to ensure supply for as long as possible in a market where shortages have pushed prices to highs of more than three years.

Lithium carbonate in China, a key material used to make rechargeable batteries, at 197,500 yuan (about $ 30,940) a ton, is up 276% from the beginning of this year, due to booming demand coupled with accelerating sales. electric car sales.

The Australian company Pilbara Minerals It just sold its hard rock lithium, or spodumene, at $ 2,350 a ton, up 88% from $ 1,250 in the July auction.

Rising prices have convinced consumers of lithium, especially in China, which dominates the electric vehicle supply chain, of the need to tie the supply with contracts that in some cases reach three years.

Fixed prices for the duration of the contract are now rare compared to previous years. Negotiations usually start in September and October and conclude in November and December. “Prices have risen more than 230% so far this year, actually due to a lack of available material,” said Caspar Rawles, an analyst at Benchmark Mineral Intelligence.

As a result, people are willing to sign longer-term contracts until 2022, “he said.

Spodumene contracts for 2022 are starting at around $ 1,500 a tonne by the start of 2022, lithium market sources say, up from $ 400 a ton to $ 1,500 a ton so far this year.

More than half of the world’s lithium is used to make rechargeable batteries, which also deal with mobile phones and laptops, while the rest are used in industries that make glass, ceramics and pharmaceuticals.

Rising prices have encouraged some miners to resume production or accelerate new projects, raising the likelihood that prices will fall victim to a surge in lithium supply.

But the lengthy chemical qualification process, delays in mining projects and a lack of investment in new projects in recent years make a significant oversupply unlikely, analysts say.

The five largest producers in the world, including Albemarle and SQM, together account for about 50% of global lithium sales.