Lithium demand slows as COVID-19 halts electric vehicle production

May 27, 2020

In the pre-COVID-19 world lithium demand was high as electric vehicle makers scrambled for the metal to power the vehicles. Since the outbreak of the pandemic, production of electric vehicles has come to a halt and in turn has halted much of the world’s lithium production because of output cuts, expansion delays and sales of major assets.

Reuters reported that lithium industry shares have dropped sharply since January and investors are giving the cold shoulder to mine developers seeking funding for lithium projects.

“This pandemic further kicks the electric vehicle (EV) can down the road,” said Seth Goldstein, a lithium industry analyst with Morningstar.
The holdup will result in a shortage of the white metal available for EV batteries when markets rebound, warned industry analysts, executives and consultants.

“We don’t want to spend a great deal on lithium at the moment,” said Vincent Mascolo, chief executive of Ironridge Resources Ltd, which has put its Ghana lithium project up for sale. “Investor appetite is not there.”

At the start of the year some analysts predicted demand would jump by 15 percent in 2020, but now the advisory group, Morningstar said it now expects a 5 percent drop in demand in 2020.

Albemarle Corp has slowed expansion projects in Chile and Australia. Tianqi Lithium Corp, saddled by debt, is selling its controlling stake in the world’s largest lithium mine. SQM said it may shelve lithium expansion plans for the year.

Analysts point to Ganfeng Lithium Co’s move this year to take control of an Argentina lithium project from smaller, indebted miner Lithium Americas Corp as the type of opportunistic deals likely during the pandemic.

Lithium executives, investors and analysts expect the downturn to roil their industry for at least a year. Some warned it could crimp operations through the middle of the decade depending on how COVID-19 affects EV deployment plans from Ford Motor Co, Volkswagen AG and other automakers.

Conventional wisdom holds that low oil prices should encourage consumers to buy internal combustion engine (ICE) vehicles. Still, electric vehicle sales should ultimately rise as environmental concerns have prompted EV subsidies and regulations in China and the European Union.
“If you make EVs the only vehicles available on the lot, consumer buying patterns change very fast,” said Devin Lindsay, an automotive analyst at IHS Markit Ltd.

And because China and the EU are the world’s biggest EV producers, their regulations are seen as ultimately forcing greater EV adoption in the United States, where fuel prices might usually influence car buying.

“For good or bad, this EV thematic is driven by regulations and government incentives, rather than economics,” Paul Graves, chief executive of lithium producers Livent Corp, told Reuters.

EVs are expected to become the most-popular vehicles, globally, though the pandemic makes the timing uncertain.

 

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