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Key Challenges and Opportunities in the Lithium Metal Market

The global demand for lithium metal batteries is surging, yet production falls short of meeting the need, hindering industry growth. According to Benchmark’s Solid-State and Lithium Metal Forecast, the sector faces challenges in sourcing adequate lithium metal for battery production, despite its high capacity potential.

In 2024, if all suitable lithium metal produced were used for batteries, it could support 5 to 10 gigawatt-hours (GWh) of cell production. However, much of the lithium metal is diverted to other industries, leading to a supply deficit this year. From almost 10 GWh in deficit in 2024, jumping to around 60 GWh by 2026.

lithium metal production forecast

Chinese Dominance and Global Ambitions

China dominates global lithium metal production, accounting for over 90% of capacity in 2023. This dominance is poised to continue, with China aiming to double its capacity within the next 3 to 5 years.

Currently, some companies worldwide are scaling back output and spending due to improved supply prospects and slowing demand from EVs. Yet, Chinese firms are taking a different approach. 

China’s leading lithium companies, Tianqi Lithium Corp. and Ganfeng Lithium Group Co., are undeterred by recent profit declines and aim to expand their market presence. Despite sharp drops in net income in 2023 due to plummeting prices, both companies are focused on acquiring global lithium reserves and increasing production capacity. They believe in the long-term potential of rising demand for lithium, looking beyond current challenges.

Tianqi seeks partners to explore high-quality lithium sources, accelerating work at its Yajiang mining project in Sichuan province. Meanwhile, Ganfeng plans to develop low-cost resources like lithium derived from brine and expand processing facilities in China and Argentina.

These companies’ optimism aligns with other Chinese miners like CMOC Group Ltd. and Zijin Mining Group Co. They are also eyeing opportunities in battery materials amid signs of a potential price recovery.

However, this total capacity may not meet the requirements of next-generation battery technologies.

Growing Demand Amid Technical Hurdles

The deficit arises as demand for lithium metal batteries grows rapidly, exceeding 10 GWh by 2026. Developers are transitioning from cell development to pilot production, driving up demand for lithium metal.

The precursor to lithium metal, lithium chloride, is sourced directly from brine or converted from lithium carbonate. However, most brine resources have unsuitable impurity profiles, and converting lithium carbonate incurs significant capital expense.

Next-generation lithium metal batteries require thinner lithium metal foils for the anode, challenging traditional production processes. Overcoming this technical barrier is crucial for industry growth, with companies exploring novel approaches to address this challenge.

Nevertheless, trading of the metal in CME Group Inc. is experiencing a significant surge, drawing increased attention from funds amid declining battery metal prices.

The contract has seen open interest reach a record high of 24,328 contracts in the first quarter, extending to September 2025. This uptick in open interest indicates a notable increase in liquidity within the contract. This further suggests a maturing market for the lithium industry.

CME lithium trading price

Trading Surge Reveals Market Resilience

The growth in open interest follows a robust year in 2023, primarily driven by arbitrage trading between China and the US. Notably, China introduced its lithium carbonate contract on the Guangzhou Futures Exchange in July last year. In turn, this further contributes to the trading activity. 

This development underscores the growing importance of lithium derivatives markets as key tools for industry participants to manage price risks.

The rise in liquidity in CME’s lithium hydroxide contract is a positive sign for an industry grappling with challenges. Prices of lithium have declined by over 80% from their record high in November 2022. This drastic drop in prices has been attributed to shifting market dynamics, swaying between fears of shortages and the emergence of surplus inventories.

lithium price since 2020 S&P Global

Despite the challenges facing the industry, the surge in open interest offers assurance to funds and financial participants. It provides them with the confidence that they can easily trade the contract, enabling them to enter and exit positions as needed, even in the face of adverse price movements. 

Additionally, more Asia-based funds are showing interest in trading the CME contract this year, reflecting the growing appeal of lithium as an investment opportunity.

Moreover, the current market conditions, with lithium prices in contango (futures prices higher than spot prices), present lucrative opportunities for funds. 

The contango structure allows traders to profit by buying futures contracts and selling them at a higher price in the future. This has attracted the attention of funds looking to diversify their portfolios and capitalize on the volatility in commodity markets.

The increasing liquidity and trading activity in CME’s lithium hydroxide futures contract signal a growing interest in lithium derivatives. With trading volume on pace to surpass last year’s record, lithium futures are attracting the attention of investors seeking exposure to the rapidly evolving battery materials sector. 

The post Key Challenges and Opportunities in Global Lithium Metal Market appeared first on Carbon Credits.

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Lithium Prices Today: What Are the Factors That Affect Them?

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Lithium Prices, What Factors Affect Them

Lithium, a crucial element in energy storage, holds immense significance in powering various industries. With metal prices soaring, the demand for lithium has surged over recent years. 

This article delves into the intricate world of lithium dynamics, exploring the factors influencing lithium prices, recent trends, and future projections.

Key Factors Impacting Lithium Prices 

Supply and Demand

Global production of lithium has seen a remarkable increase. In 2020, the total demand for lithium worldwide was 292 thousand metric tons of lithium carbonate equivalent. 

Forecasts indicate a substantial rise to over 2.1 million metric tons by 2030, highlighting the industry’s exponential growth. This surge is primarily due to the rising battery demand for electric vehicles, which is expected to reach 3.8 million tons by 2035.

lithium demand projection 2030
Source: The World Economic Forum

Data from the US Geological Survey shows that global lithium production reached 180,000 metric tons in 2021, with about 90% coming from just three countries.

Market Demand

Despite robust demand for lithium, growth experienced a decline year-on-year in 2023 due to economic slowdowns, particularly affecting the electric vehicle market in China. Additionally, accelerated capacity expansions led to an oversupply situation. These fluctuations underscore the delicate balance between supply and demand that significantly impacts lithium prices globally.

Economic Factors

Economic factors such as inflation rates and currency fluctuations also influence lithium prices considerably. These macroeconomic indicators directly impact production costs and subsequently affect pricing strategies within the lithium market.

Major Trends in Lithium Pricing

Recent Price Trends

Lithium prices have recently experienced a notable downward trajectory. As of December 18, prices plummeted by 80% within a year, and as of May 7, CIF North Asia price at $14,600/t. This decline has sparked discussions about the sustainability of this trend. 

lithium prices april 2024

Expert insights suggest that low prices may lead to reduced supply and hesitant new investments amidst strong demand and cautious predictions.

Effect on the EV Sector

The lithium price drop has a significant impact on the EV sector. Reduced input costs present opportunities for manufacturers to recalibrate pricing strategies, potentially driving down EV costs and increasing consumer adoption rates. This shift highlights the interconnected nature of commodity pricing and its far-reaching consequences on diverse industries.

What’s the Future of Lithium Prices?

As the lithium market navigates significant fluctuations, industry experts provide valuable insights into future price trajectories. By examining expert predictions and analyzing market opportunities and challenges, stakeholders can comprehensively understand the dynamic landscape ahead.

In a recent interview, industry analyst Joe Lowry predicts that the lithium chemical supply is nearing equilibrium, with prices expected to rise by mid-2024 as inventories rebuild in key markets like China. Similarly, Andy Leyland emphasizes that the lithium market’s balance is delicate and that a projected surplus of 24,000 tonnes LCE in 2024 could quickly change due to market dynamics. 

Staying informed about lithium carbonate and hydroxide prices is crucial for industry participants to capitalize on opportunities and navigate challenges. Monitoring real-time lithium prices and commodity trends provides invaluable insights for strategic positioning amidst market uncertainty.

The post Lithium Prices Today: What Are the Factors That Affect Them? appeared first on Carbon Credits.

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Japan Passes New Bill to Bolster its CCS Technology and Capacity

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On May 17th, Japan’s House of Councillors passed a new law to bolster the business environment for carbon capture and storage (CCS) technology which is crucial for achieving a decarbonized society. The legislation received majority support in the plenary session.

Key Provisions of Japan’s New CCS Law

The law mandates that the government introduce a permit system for businesses to facilitate CO2 capture from industries operating at variable scales and their underground storage. This measure is part of Japan’s broader strategy to achieve net-zero carbon emissions by 2050. 

Role of Japan’s Ministry of Economy, Trade, and Industry (METI) 

To foster a conducive business environment for CCS projects, the Ministry of Economy, Trade, and Industry (METI) of Japan will establish a licensing system. It will cover storage and exploration drilling rights, and develop business and safety regulations for storage companies and CO2 pipeline transportation businesses. Test drilling permits at potential CCS sites will initially be valid for four years. METI will designate suitable geological storage areas as “specified areas” and solicit operators, granting licensed operators prospecting and storage rights.

Notably, this is the first time the CCS bill defines operators’ rights and regulatory requirements. The main highlights of the newly introduced bill are: 

CCS Sites and Business permits

  1. Designate Suitable Areas: Identify specific regions where carbon dioxide (CO2) can be safely stored underground.
  2. Grant CCS Business Permits: Select businesses through a public offering process and grant them permits to operate CCS projects.

Licensed operators will be given

  1. Exploratory Drilling Rights: These rights allow businesses to drill and confirm if geological formations are suitable for CO2 storage.
  2. Storage Rights: These rights permit the actual storage of captured CO2 underground.

Obligations and Liabilities

The law imposes several obligations on businesses:

  1. Monitoring: Businesses must continuously monitor for any CO2 leaks.
  2. Liability for Accidents: Businesses are liable for compensation regardless the leak was due to negligence or an intentional act.

CCS project operators must have their implementation plans approved by the Minister for Economy, Trade, and Industry. Once the stored CO2 is stabilized, the Japan Organization for Metals and Energy Security (JOGMEC) will take over the management. Operators will be liable for compensation during accidents, regardless of intent or negligence.

Subsidy System for Hydrogen

In addition to the CCS law, the House of Councillors also passed a law to establish a subsidy system. This system aims to narrow the price gap between hydrogen and natural gas, promoting hydrogen as a viable next-generation energy source.

This comprehensive approach strengthens Japan’s efforts to reduce carbon emissions through CCS and supports the broader adoption of hydrogen energy, aligning with the country’s long-term environmental goals.

Japan Advances Carbon Capture under Green Transformation (GX) Policy

Japan’s newly approved law is crucial to achieving a decarbonized economy. It’s an extension of the Green Transformation (GX) Policy that existed since last year. 

Unveiled in February 2023 and approved in July 2023, Japan’s GX policy integrates fiscal and policy measures, potentially amounting to a $1 trillion (150 trillion yen) budget. This policy provides a roadmap for the next decade, balancing economic growth with environmental sustainability.

Japan’s Prime Minister Fumio Kishida said,

 “First of all, green transformation, or GX in short, does not just mean the departure from fossil energy. It involves the implementation of major reforms of energy, all industries, and our economy and society, toward achieving the goal of carbon neutrality by 2050. To this end, Japan has made a highly challenging international pledge of a 46 percent reduction in greenhouse gas emissions by fiscal 2030.”

Image: The Tomakomai CCS Demonstration Project- Japan’s first full-chain CCS project, captured and stored CO2 from a coastal oil refinery on Hokkaido Island in Japan from 2016 to 2019. 

Japan CCSsource: IEA

Based on International Energy Agency (IEA) calculations, 

  • Japan’s estimated annual storage capacity for CCS could range from 120 to 240 MTs by 2050. The goal is to have the first commercial CCS project operational by 2030.

By advancing these legislative measures, Japan aims to create a robust framework for CCS and low-carbon hydrogen, supporting its long-term decarbonization and economic growth objectives.

By enacting these laws, Japan is taking significant steps toward a sustainable and decarbonized future, leveraging both CCS technology and hydrogen energy to mitigate climate change.

The post Japan Passes New Bill to Bolster its CCS Technology and Capacity appeared first on Carbon Credits.

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What is CSRD and how does it affect your business?

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The Corporate Sustainability Reporting Directive (CSRD) is a significant regulatory development aimed at enhancing transparency and accountability in corporate sustainability practices within the European Union. This directive broadens the scope of companies required to report on their sustainability efforts and introduces more detailed and standardised reporting requirements. 

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