Alejandro Salas, CEO of Santiago-based Lithium Extraction Works, believes lithium prices are set to soar over the next year, as shortages in the market caused by halted operations begin to emerge.
One of the major drivers of demand for the metal in recent years has been battery production for the electric vehicle market. During the Covid-19 pandemic demand for EVs has plummeted though, with travel restrictions seeing sales drop sharply across all vehicle types.
Sales of new cars in Europe fell by as much as 90% in April.
But demand is set to pick up, says Salas. Like most Chilean producers Lithium Extraction Works were able to maintain production through the pandemic, albeit at a reduced level due to government restrictions. In other nations though more stringent pandemic regulations had a larger impact, most notably in China where production all but ground to a halt.
Lithium prices were in freefall before the pandemic, with ever-growing supply driving prices down. Whilst demand slowed due to public health measures implemented by governments around the world, Salas believes this will return in 2021 as the world learns to deal with the coronavirus, and when it does output levels are going to be found lacking.
“Production cannot just be increased overnight,” he said. “Demand is set to spike as the world reopens, and when this happens suppliers won’t be able to keep up.”
“The inevitable result is that prices will rise.”
Salas was keen to stress that his own company was ready to take advantage of renewed demand, but cast doubts on the capabilities of the industry as a whole. Citing China as a particular concern, he stated that “overreaching” government intervention in some countries may see production levels continue to falter.
After continuously falling for a period of two years, lithium prices started to steady through the second half of 2020.