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Lithium Economics
SQM
Announces a Reduction in Lithium Prices
Oct 01, 2009
Will SQM´s recent announcement to reduce
lithium prices delay even further Bolivia's introduction into one of today's
hottest commodity markets of the world?
Will SQM´s recent
announcement to reduce lithium prices delay even further Bolivia's introduction
into one of today's hottest commodity markets of the world?
A
couple of days ago, while I was giving a lecture on Bolivia's lithium potential
at the Bolivian Catholic University, I recalled two of the three conditions for
lithium to become a key factor in the forthcoming Sixth Techno-economic
Paradigm mentioned
in a previous
article,
namely:(i) clearly perceived low and rapidly falling relative cost; and (ii)
apparently almost unlimited availability of supply over long periods. My
commentary was that compliance with these conditions was subjected to a great
extent to what the country holding almost half the lithium resources of the
world finally decides to do in terms of how and when it enters the lithium
market.
To
begin with, I argued that it is not the same to enter one of the hottest
commodity markets nowadays with 480 MT of lithium carbonate equivalent (LCE) a
year (the estimated production of the pilot plant project in 2010 currently
pursued by the government of Bolivia) as looking for a more ambitious figure
such as 30,000 MT of LCE (the estimated production of an industrial project to
begin operation in 2015). Here I was referring to another two points suggested
by myself a few months ago for Bolivia to become the new Saudi
Arabia of lithium, both regarding Bolivia's imperative to produce lithium
carbonate in a proportion to the world's needs and lithium prices not to increase
so as to make other lithium resources (i.e. spodumene) commercially viable.
Needless to say, I was aware of the fact that the larger the production Bolivia
throws into the market the larger the reduction in lithium prices that we will
have to face as a result. I also commented on what happened to the value of the
metal in 2001 and the following 4 years when SQM started to operate as the
largest lithium carbonate producer of the planet and how this affected
especially to other spodumene producers at the time. Of course, it was then
clear to me (as it is now) that an increased production today particularly
coming from the world's largest lithium deposit in the face of more than
interesting prospects for an imminent electric car revolution in a few years
amounted to quite a different story. It would pertain to paving the road for
the arrival of the “Next Big Thing”.
Similarly,
I contended that Bolivia should not wait one single day to start producing
lithium carbonate because it was crucial to (a) provide a correct signal to
the world that it is capable of supplying as much lithium as the market
requires; (b) contribute to reducing the cost of lithium-ion batteries to ensure massive access of consumers to electric vehicles; and (c) postpone the
development of alternative technologies (e.g. hydrogen or methanol).
At
first sight, SQM's recent
announcement that it will reduce its lithium carbonate and lithium
hydroxide prices by 20% to accelerate demand recovery, create incentives for
research of new lithium uses, and contribute to the sustainable long-term
development of the lithium market seems astonishing to say the least. Is SQM
aiming at delaying, even more, the introduction of Bolivia into the lithium
market?
This
comes at the worst of all times for Bolivia, it comes when it just announced
that its pilot plant will start production one year later (2011) the original
date stated about a year and a half ago and confirmed that it will definitely
“play solo” to produce lithium carbonate at an industrial scale beginning 2015.
Times Article Viewed: 3995
Note.- This is a republication of a blog originally published on EVWorld.com on October 01, 2009.
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