Lithium Can Avoid Crash By Disciplined Growth, China Giant Says

  • Tianqi prizes long-term demand growth over short-term prices
  • Spot prices will continue to fluctate, Tianqi’s Wu says

China’s Tianqi Lithium Corp., the nation’s biggest producer, said the likelihood of a market bust will depend on how well the industry manages expansion.

“Whether there is going to be oversupply totally depends on how the leaders behave,” Chief Executive Officer Vivian Wu said Wednesday at the processing plant Tianqi is building in Western Australia. “Are we going to behave in a disciplined way? We want to help our customers grow sustainably, not just to grab the short term.”

Lithium prices almost tripled in the year to June and producers are seeking to expand amid booming demand driven by rising sales of electric vehicles, which require the metal for rechargeable batteries. The lithium frenzy may end in tears as future supply will expand, outpacing demand, with mine capacity expected to climb by about 70 percent in the decade to 2025, Sanford C. Bernstein Ltd. said in a report this month.

“You will definitely see that growth in demand,” Wu said, noting the Bernstein report. “That is very certain. You can actually feel it and touch it in China. We want the growth to be sustained.”

Tianqi will begin construction at its A$400 million ($303 million) plant in Kwinana this month to boost the company’s processing capacity by more than 50 percent. The plant will produce 24,000 metric tons a year of lithium hydroxide with the ore coming from the nearby Greenbushes mine, the world’s largest hard rock lithium mine, that’s 51 percent owned by the company.

Spot prices will fluctuate and that market is separate to the long-term contracts that Tianqi uses to sells much of its product to customers including Panasonic Corp., Wu said. The quality of supply is more important to customers than the spot price, she said.

There are other firms looking to build new projects and Deutsche Bank AG and Macquarie Group Ltd. have both forecast that the market will move into a larger surplus at the start of the next decade. Newcomers hoping to develop new mines may find it’s harder and takes longer than they expect, and they may not be able to compete on costs, she said.

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