Lithium ("Li") is a soft, silvery-white metal with a concentration in the Earth's crust similar to that of lead and nickel. Lithium is found combined in small amounts in nearly all igneous rocks and in the waters of many mineral springs. Spodumene, petalite, lepidolite, and amblygonite are the more important minerals containing lithium. Lithium is currently produced from brines that yield lithium carbonate when treated with sodium carbonate, as well as from igneous rocks which contain concentrations of lithium-bearing minerals. Chile, Argentina and Australia have considerable lithium resources and are the main producers of lithium. The metal is produced by the electrolysis of molten lithium chloride and potassium chloride.

Lithium is used commercially in various ways with applications covering a diverse range of end uses including glass and ceramics, batteries, chemicals and aluminum alloys. In recent years, the focus on lithium fundamentals has been primarily driven by the growing demand for various battery applications, particularly in the EV and portable electronic industries.

Wood Mackenzie estimates global lithium demand to be approximately 260 kt lithium carbonate equivalent ("LCE") in 2018. Demand growth over the past several years has been primarily driven by the battery sector, in particular an accelerating EV market which is anticipated to continue.

In 2017 battery applications accounted for an estimated 45% of total lithium consumption and Wood Mackenzie expects them to be approximately 65% by 2022, growing at a 20% CAGR over the next five years. Within the EV segment, battery-related lithium demand over the next five years is forecasted to grow at a 26% CAGR lifting the total lithium market to more than 400 kt LCE by 2022.

Lithium is extracted from two primary deposit types: hard rock minerals and natural evaporative saline brines. Lithium minerals, in the form of spodumene or petalite concentrate, have applications in glass and ceramics products. Lithium recovered from brine deposits, is commonly produced as lithium carbonate (Li2CO3) or lithium hydroxide (LiOH) and is used in a wide variety of battery and chemical applications. Lithium brine deposits are estimated to account for 90% of global lithium reserves and approximately 50% of global production. This is expected to increase to nearly 70% of global production over the next two years given the relative availability of brines, lower operating costs, and changes in brine processing technology which has significantly reduced capital costs on a tonne LCE produced basis.

Approximately three-quarters of global lithium supply is produced by five companies (Albemarle Corporation, FMC Corporation, Jiangxi Ganfeng Lithium Co., Ltd., Sociedad Quimica y Minera De Chile S.A., and Tianqi Lithium Corporation) roughly split between brine mines (largely in Chile and Argentina) and open pit hard rock spodumene mines in Western Australia. Global lithium reserves are estimated by the USGS to be at 16 million tonnes with approximately approximately 80% located in Chile, China, and Argentina.

Wood Mackenzie estimates global lithium supply to be approximately 251 kt LCE in 2018 with roughly 75% of production coming from two countries, Australia (55% of global production) and Chile (21% of global production). Over the next five years, Wood Mackenzie anticipates lithium supply to grow at a 14% CAGR reaching 434 kt LCE by 2022 with production from a geographic perspective remaining relatively similar to 2018 levels.

Lithium prices have responded positively to the lithium deficit over the past two years. Wood Mackenzie forecasts the continuation of the deficit market through 2018 with supply gradually outstripping demand over the next five years leading to a surplus of approximately 47 kt LCE by 2020. With the majority of lithium production controlled by a small number of producers who hold underutilized capacity, it is possible that latent capacity will be utilized to challenge new entrants, and scaled back as prices become pressured.

Prices for lithium carbonate and lithium hydroxide are set by negotiations between buyers and sellers. In China, prices have significantly increased from indicative pricing of US$5,000-$6,000/t in 2013 and 2014 for 99.0%-99.5% lithium carbonate to current pricing of just over US$20,000/t for lithium carbonate and approximately US$23,000/t for lithium hydroxide.