The lithium market continued recovering during the March 2021 quarter. Average global prices for lithium carbonate increased by more than 50% from the December 2020 quarter as demand from cathode manufacturers continued to increase production in response to the Electric Vehicle (EV) driven demand.

Demand for Electric Vehicles (EVs) continues to accelerate with global sales during January and February 2021 more than double those of January and February 2020 as sales were constrained by COVID-19 in China.

EV models with lithium carbonate dominant chemistry batteries continue to be the preference in China where the battery grade lithium carbonate spot prices increased approximately 90% during the March quarter as cathode manufacturers rushed to secure supply. Prices in Asia-ex China increased by approximately 25% during the quarter.

Support from national governments towards EVs strengthened during the March 2021 quarter particularly in North America with the Biden administration committing US$174 billion investment in EVs through a mix of subsidies to individuals and the private sector, as well as replacing the government's vehicle fleet with EVs.

Longer- term EV demand outlook has been revised upwards by a range of market analysts in recent months, suggesting that estimated global sales will increase from 3.2 million units in 2020 to approximately 14 million units by 2025. Demand for lithium chemicals is expected to increase to approximately 1 million tonnes by 2025 following recent investment commitments on battery giga factories by the private sector.

Lithium chemicals production continued at reduced capacity in China during March 2021 which was impacted by the spring holiday as well as restricted feedstock supply from Chinese brines due to cold weather conditions and reduced production capacity from Australian spodumene producers. Such market dynamics coupled with increased demand from cathode manufacturers led to further inventory reductions in the region and pricing increases for spodumene and lithium chemicals in the spot market.

In response to the favourable market conditions, Australian spodumene producers and Chinese convertors are expected to increase production/conversion capacity throughout the rest of CY2021. Additional lithium chemicals production is also anticipated from South American producers towards late 2021. However, it's estimated that global lithium chemicals production will not be able to catch up with growth in demand in the short term.