Low Supply For Lithium Is Driving Up Prices

According to Bloomberg Markets, the supply of lithium to keep up with demand is struggling. In an article authored by Laura Milan Lombrana and Johnathan Gilbert, lithium mines are having difficulties getting the raw materials out. Extracting the minerals from areas such as South America are proving to be more difficult than expected, and the result is a change in the market that is driving up prices. “The uncertainty on the supply side is driving prices up and making investors nervous,” said Daniela Desormeaux, CEO of Santiago-based lithium consulting firm SignumBOX. “We need a new project entering the market every year to satisfy growing demand. If that doesn’t happen, the market will be tight.”

According to the U.S. Geological Survey, Australia is the largest lithium producer, with Chile and Argentina accounting for 67 percent of global reserves. In one example, Orocobre Ltd., an Australia based company mining in South America, forecasted it would produce 15,000 metric tons for the year through June but ended up at 11,862 tons. The discrepancy was attributed to additional disruptions from bad pumps and bad weather that have slowed production.

The Bloomberg article goes on to say that expansions by established producers, including China’s Tianqi Lithium Corp. and North Carolina’s Albemarle Corp. will more than likely leave a small global surplus by year end, but supply disruptions could put the market back into deficit, CRU’s Fuentes said. If annual demand for Tesla’s Model 3 reaches 700,000 units, as Musk says could happen, the industry will need additional supplies from lithium newcomers. Click Here for the full story on BloombergMarkets.com.