As part of Fitch Solutions Country Risk and Industry Research’s expanded coverage of battery minerals lithium and cobalt, it is launching a new lithium price forecast (for both carbonate and hydroxide), adding to its existing mineral and metal price forecast portfolio.

Fitch Solutions expects broad lithium prices to trend higher this year and next, as accelerating demand for lithium-ion (Li-ion) batteries and a tight upstream supply keep prices elevated.

The company forecasts Chinese lithium carbonate 99.5% to average $13 450/t this year and $15 025/t in 2022, and for Chinese lithium hydroxide monohydrate 56.5% to average $11 950/t this year and $14 300/t in 2022.

So far this year, lithium prices have experienced a considerable rally, as post-Covid-19 demand for lithium chemicals recovered alongside the automotive industry, Fitch notes.

In line with its view, broad lithium prices have since normalised, with Chinese spot prices for battery-grade lithium carbonate and lithium hydroxide exhibiting slower growth compared with January and February.

Fitch Solutions highlights that increasing demand for lithium chemicals for use in electric vehicle batteries and energy storage systems will support elevated prices in the short term, but it does not expect to see any significant jumps that would push prices up to the highs observed in 2016 and 2017.

The company says a tighter lithium supply will persist through 2023, maintaining elevated prices before current developments begin to come on line.

In the longer term, lithium prices are likely to be impacted on by green premiums owing to the heightened priority given to sustainable lithium extraction techniques, Fitch says.

It expects to see an increase in private supply agreements, which could decrease pricing transparency in the lithium market and ultimately push broad lithium prices higher.

It notes that the longer-term fate of lithium carbonate prices will depend on technological adaptation to mining techniques at lithium brine reservoirs.

Fitch says a faster-than-anticipated advancement of battery recycling technology presents a risk to lithium prices by significantly expanding sustainable lithium supply.