Rio Tinto confident lithium will retain its battery metal crown

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Lithium's low price may be its best defence in fighting off challenges from other materials. — Reuters
IT'S a tough time to be a lithium producer as the light metal sinks under the weight of excess supply.
Lithium hydroxide prices have collapsed by 90% from their 2022 peak and show no signs of recovery.
Multiple producers are now operating at zero or negative margins, according to consultancy Wood Mackenzie.
Even giants like Albemarle, the world's largest producer of the battery metal, have been cutting costs and deferring new projects to weather the supply storm.
Rio Tinto, however, is undaunted.
The global mining house remains 'consistent in its belief in the long-term outlook for lithium'.
The company is putting its money where its mouth is, snapping up US-based producer Arcadium for US$6.7bil and partnering with Chilean state entities on two projects.
It's a big call, given the current despondency in the market, but Rio believes demand will be strong enough both to absorb the current excess and pull the market into deficit around the turn of the decade.
It's a bet that lithium will remain the dominant battery metal in a fast-changing landscape.
The weakness in the lithium price results from too much new supply hitting the market at the same time.
Global lithium production grew by over 35% year-on-year in 2024, according to the International Energy Agency (IEA).
New mines are still ramping up and Chinese players show little appetite for cutting production.
The supply tsunami, however, masks the strength of lithium demand.
The IEA estimates global usage grew by 30% last year, the increase being equivalent to the size of the entire global market in 2018.
The electric vehicle (EV) sector, the biggest user of lithium-ion batteries, is in robust health.
Sales of new energy vehicles rose by 25% last year and were up by 29% in the first quarter of this year, according to consultancy Rho Motion.
Lithium use in energy storage systems is growing even faster as global power systems pivot towards cleaner but intermittent energy sources such as solar and wind.
Rio Tinto said it expects demand to grow at a compound annual rate of over 10% through 2040.
The main threat to that scenario would be a shift in battery chemistry as manufacturers compete to produce ever cheaper, more efficient batteries.
There has already been a big shift away from more expensive battery metals such as cobalt and nickel but to date lithium has maintained its status as the dominant ingredient in the chemistry mix.
The amount of nickel and cobalt deployed in new energy vehicles was up by just 12% and 2% year-on-year respectively in March, according to Adamas Intelligence.
But lithium deployment was up by 30%, matching the overall EV sales growth rate.
The battery materials battle, however, is far from over.
Chinese giant CATL has been pioneering the development of sodium-ion batteries.
The latest iteration, Naxtra, will almost match in efficiency the lithium iron phosphate (LFP) batteries that are displacing nickel-manganese-cobalt or NCM chemistries.
CATL's billionaire founder Robin Zeng sees sodium-ion batteries potentially replacing up to half the market for LFP batteries.
The IEA is less sure, noting that sodium-ion batteries are most competitive in a high lithium price environment, which the current one is certainly not.
Lithium's low price may be its best defence in fighting off challenges from other materials.
Furthemore, it is also causing battery prices to fall, making new energy vehicles cheaper.
Average battery pack prices fell by 20% to a record low of US$115 per kilowatt-hour in 2024, the largest annual drop since 2017, according to the IEA. — Reuters
Andy Home is a columnist for Reuters. The views expressed here are the writer's own.