Lithium prices have rallied this year and are now at record high levels amid the sharp acceleration in demand, while global supply struggles to expand, Fitch Solutions Country Risk and Industry Research notes in a report.
Fitch Solutions says lithium prices have rallied beyond its expectations.
Therefore, it is revising up significantly both its lithium carbonate and hydroxide price forecasts from this year to 2026, to incorporate higher global electric vehicle (EV) sales assumptions.
Fitch Solutions now expects 2022 carbonate prices to average $21 000/t, compared with the $15 025/t previously forecast.
Moreover, the unit sees significant upside risks to its 2022 price forecasts.
In the very near term, Fitch Solutions says prices look set to continue heading higher, as the lithium market remains very tight and there is little downside for prices.
Demand growth will continue to outstrip supply expansion, which will further tighten the global balance, Fitch Solutions states.
It says it now sees prices averaging lower in 2023, as it is seeing the first signs of an improvement in supply with companies accelerating their development, and some players restarting operations that were put on care and maintenance when prices crashed.
Fitch Solutions forecasts carbonate prices to average $19 000/t in 2023, down 9.5% year-on-year.
It says that, while global supply growth will accelerate from 2023 onwards, demand growth will remain buoyant in 2023 as key economies continue to make clear progress towards EV penetration, which will keep a floor under prices.
Ultimately, battery manufacturing locations will drive geographical demand for lithium, it notes, adding that China will remain the largest battery manufacturer by far for the time being.
In the longer term, the fate of lithium carbonate prices will depend on technological adaptations to mining techniques at lithium brine resources, says Fitch Solutions.