Global Lithium Mineral Energy shortage Electric vehicle supply chain pressure will be further intensified

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(Pilbara Minerals Ltd.) of Pilbara Mining, one of the largest lithium miners in Australia. Sharp cuts in production and shipments of lithium mines on Tuesday will further tighten the supply of key raw materials for electric vehicle batteries.

The Perth, Australia-based company cited a number of reasons for the decline in shipments, including equipment commissioning, unexpected production shutdowns and a shortage of skilled workers.

Pilbara cut its forecast for spodumene shipments to 380000 to 440000 tons in the fiscal year ending June 30, compared with a previous forecast of 440000 to 490000 tons.

The growing global demand for electric vehicles has given a big boost to lithium consumption and supported the price of the battery raw material, which has more than tripled this year to record levels. Lithium miners are stepping up efforts to increase their capacity, but they do not seem to be able to keep up with market demand, which is likely to remain tight in the short term.

Pilbara is also aggressively expanding production after the company announced earlier that it would expand its production capacity at its Pilgangoora plant in Western Australia because of promising demand for lithium mines to make batteries for electric cars.

"We expect lithium chemical products and spodumene prices to continue to rise," said Dennis Ip and Leo Ho, analysts at Daiwa Capital Markets. Spodumene is in particular short supply and prices will continue to rise, they added.

Ken Brinsden, general manager of Pilbara, said: "We are not immune from the shortage of skilled workers currently affecting the resources industry in Western Australia. The recent trend in lithium prices highlights the emergence of a severe shortage of raw materials, and Pilbara Mining is making every effort to respond quickly to customer demand by increasing short-and medium-term production capacity. "

Other lithium miners, as well as mining giants BHP Billiton and Rio Tinto, have been similarly affected, with the novel coronavirus outbreak triggering border restrictions that have had a negative impact on immigrants or labour inflows on which the industry depends.

"We will not be surprised if the start of new projects in the mining industry and refineries is delayed in the future," said Ip and Ho, analysts at Daiwa Capital Markets.

Pilbara said the average price accepted in the quarter to December was likely to be at the high end of its previous guidance range of $1650 to $1800 per dry tonne. Earlier this year, the company began selling spot on an online auction platform, with prices reaching $2350 a tonne in October. At the same time, the long-term fundamentals of lithium ore remain bullish, with demand fivefold by 2030, according to Bloomberg NEF forecasts.

Kwasi Ampofo, head of metals and mining at Bloomberg NEF, said, "We expect the supply chain restrictions that affect the transportation of raw materials this year to continue until 2022." He added that the prices of lithium, graphite and cobalt are likely to remain high and may not fall until 2023, although the price of nickel is likely to fall by the second half of next year.