INFOGRAPHIC: What is lithium worth?
Content courtesy of Benchmark Mineral Intelligence
Different generations find different uses for raw materials, changing the value of these inputs over time.
Lithium is not a new discovery, but its applications are. Scientists first discovered lithium as an element in 1817, but it was not until the 1970s that studies into lithium-ion batteries began.
It was a British chemist working for Exxon that first proposed the idea of lithium-ion battery. However, after some initial testing, Exxon abandoned the project.
Nonetheless, lithium-ion battery technology has evolved into regular use through cell phones and electric vehicles. It offers an alternative to fossil fuels that global industry can run on.
Just as the world currently watches the prices of oil to determine the trade winds, lithium could become just as important for the worldwide movement to clean energy.
Pricing the new oil
Traditionally, buyers and sellers have priced lithium through long-term contracts. However, in recent times, there has been a push from major end-users, especially automotive OEMs, to have more price transparency and to use third-party independent contract references in negotiations.
Benchmark Mineral Intelligence has created a standard for pricing the special lithium chemistry for the battery supply chain that the industry can rely on.
Supply & demand: miners, manufacturers and end users
Lithium is a hot commodity in the mining, manufacturing, energy storage, and automobile industries today. The current size of the market is small, but the potential is huge.
In 2016, the world’s leading lithium battery companies produced 29GWh of batteries. This production is forecast to grow to 1049GWh by 2028, an increase of 3516%.
Data collection and price reporting
There are three cornerstone factors Benchmark uses to set the lithium industry’s reference price.
- Quality and grade of lithium
- Shipping costs and volumes
- Quality and reliability of information
Let’s look in deeper at each one:
1. Quality and grade of lithium
Most of the world’s lithium comes from two sources: mined from hard rock deposits of pegmatites, or pumped from lithium brine salars.
Grade and impurity of extracted lithium have unique profiles which will affect its price. Lithium is converted into different compounds: spodumene concentrate, lithium carbonate, and lithium hydroxide.
These different varieties suit manufacturers’ exact specifications with different cost profiles.
2. Shipping costs and volumes
The origin and destination of lithium is an important choke point for pricing information. At these locations, “incoterms” are set rules that represent the destination and origin of the material, which in turn affects the cost of lithium.
3. Quality and reliability of information
In order to generate a lithium price, Benchmark embarks on the industry’s most rigorous price data collection process that relies on constant contact through email, phone calls, and in-person meetings.
Benchmark analysts evaluate the information received against volumes traded, the position of a company in the market, and reliability of the source of information.
Independent and accurate prices will be key as the lithium market grows, providing a solid foundation for contract negotiations and a level of transparency that will help attract capital to the market.
The varying nature of lithium chemicals makes it difficult to manage risk, but Benchmark Mineral Intelligence is building a standard for pricing lithium to help manage this, and set us off on a new era of energy.