After a decade on the rise, lithium demand will drop for the first time since the subprime crisis

Experts project a drop in demand for the metal for the year of around 5%, which would be concentrated in the first months of 2020, as a recovery is expected for the second half, although not enough to end in blue.

In the last 10 years the lithium industry has grown strongly and for Chile, which has 48% of the world’s mineral reserves, this has been good news. However, the arrival of the Covid-19 changed the scenario, since in the first quarter there was a significant drop, both in demand and in the production of lithium. Specifically, global lithium carbonate exports fell 8.5% in the first quarter, compared to the same period last year.

This will lead to the year ending, according to projections by experts, with a drop in demand of around 5%, the first since 2009, that is, in the midst of the subprime crisis. It is an unprecedented pause for a market that only knew about increases. All this, associated with the coronavirus.

“Given the current level of uncertainty, we are projecting a drop in demand for lithium chemicals. However, we believe that the long-term fundamentals remain, ”said economist and general manager of SignumBOX Market Intelligence, Daniela Desormeaux. Regarding whether the fall in demand will continue, the economist assured that “the crisis will cause a drop in demand for lithium chemicals this year, and the recovery will depend on how deep the drop in the permanent income of persons”.

Along the same lines, Vantaz’s partner, Mauro Mezzano, stated that “it is estimated, in a pessimistic scenario, that demand may fall this year between 4.5% and 5% or at least 2%, but that it falls , falls off. It is estimated that the effect of this pandemic would impact that demand is delayed for a couple of years, “said the expert.

Without giving figures, but also estimating a contraction in demand this year, Plusmining’s executive director, Juan Carlos Guajardo, stated that “the demand for lithium-related end products, such as electric cars, was affected in the first quarter” . However, for the second half of the year, it expects a strong recovery hand in hand due to the priority that the Chinese government has expressed to revitalize the electric car industry.

The lower demand for lithium would only be due to the global health crisis, so an improvement is expected in the short term.

This was stated by the consultant of the CRU Group, Francisco Acuña, who stated that “in 2021 it is expected to see a more significant rebound in both the demand for lithium for electric vehicles and lithium for industrial uses. This, as a result of a recovery in the economy and also due to the reactivation of the markets. ”

Lower production. Like demand, in the first months of the year there was a drop in the production of the mineral, however, a gradual reversal is already being seen. This drop is mainly associated with China -main producer of lithium chemicals-, since in Australia there have been no major cuts and it is still early to know the real impact of production in countries such as Chile or Argentina.

However, Desormeaux assured that delays or delays have been observed in some projects or expansions, due to the uncertainty regarding the depth and duration of the crisis.

But what does that imply? “Eventually the lower production could offset, at least in part, the lower demand and also the accumulation of inventories, so if demand recovered quickly, towards the end of the year or the beginning of the next we could see a balance in the market ”, explained the economist.

Along the same lines, the CRU consultant said that he expects a drop in global lithium mining production of 10.5%. “To a large extent this is explained not only by the impact of the Covid-19, but by the still existence of inventories and a series of production reductions,” he said.

Source: La Tercera

Translated with Google Translator