Tesla strategically secured a third of Piedmont Lithium production for a whole decade in a contract once the company starts its operations. Investors worried that the company might run out of lithium to develop electric vehicle batteries impeding the production process.
Currently, the company has enough stock to last its production in the coming two years. Experts think the company has effectively resolved the challenge by securing Piedmont Lithium is the future high demand for their cars. Additionally, many other companies like Nio NIO and General Motors are enjoying lithium’s plummeting prices until a time when the supplier companies will link up with their mining partners to obtain more stock.
Encountering lithium in the market is hard for average developers. Lithium is a rare product that is not readily available on the market, like other industrial commodities due to its extensive battery industry use. Furthermore, lithium is a small market, says Andrew Miller, product director at Benchmark Mineral Intelligence, a price-reporting agency specializing in the lithium-ion battery market. Benchmark has forecast 2020 mine supply around 315,000 metric tons. For comparison, annual nickel production is close to 2.4 million metric tons, according to the International Nickel Study Group.
Andrew Miller of Benchmark Mineral Intelligence stated that the lithium market is miniature since lithium-ion battery manufacturers highly demand the commodity. The intelligence agency anticipates the excavation of approximately 315000 metric tons of the entity this year.
Miller revealed that lithium contracts are agreed upon by the clients involved since the product is scarce in the market. The client creates a rapport with the supplier to ensure that they receive lithium supply whenever they need it. Benchmark obtained its statistics by interviewing customers and suppliers since this market data is scarce due to its low trading.
Miller explained that lithium is available in sufficient quantities. The only challenge becomes the cost of extracting it from its geological situ. Lithium deposits exist in the salts of brine in Chile, spodumene of Australia, and other areas. The salt undergoes chemical processes to unmask the lithium carbonate or hydroxide before it is sent as an order to battery manufacturers. Ecofin’s expert analyst, Ethan Zhang, stated that China has a high percentage of processing potential for this element.
The rising demand for lithium has escalated its prices from $5 for a kilogram to $20 for the same quantity. Suppliers and manufacturers of this element use this pricing strategy to counteract the increasing demand and offset land deterioration due to extraction activities. Nevertheless, prices have been dynamic, with the latest price operating below $10 a kilogram. These price dynamics have opted for companies to start planning on a long-term solution to alleviate future production constraints.
In conclusion, investors in the lithium mining industry are considering the viability of clay mining over lithium mining, which creates a problem for companies depending on lithium. These companies have to compel the excavators to reconsider their stand by negotiating valuable prices or losing suppliers.