Industry-specific and broader macro-economic factors continue to impact lithium chemical demand. However, Orocobre remains focused on strong long-term demand fundamentals driven by continued growth in the electric vehicle (EV) segment and a recovery in the energy storage system (ESS) segment. As a result, Orocobre maintains long-term demand forecasts in line with the consensus of other major lithium producers of 17% to 20% CAGR between 2019 and 2025.

During the September quarter lithium chemical prices in the seaborne market remained in line with the Chinese domestic market due to the involvement of large Chinese hard rock converters. China's battery market was adequately supplied by domestic sources encouraging Chinese producers to continue supply to South Korean and Japanese battery markets.

Established South American brine producers leveraged their cost structure to marginalise independent hard rock suppliers that are still in ramp-up and have limited opportunity to lower price. As a result, Chinese imports of lithium chemicals grew at the expense of new, independent hard rock supply.

Battery customers maintained a cautious approach to procuring raw materials while glass, ceramics customers and small chemical conversion plants reported adequate supply to meet near-term requirements. Large chemical converters purchased opportunistically resulting in an aggressive pricing environment.

Short-term demand remained subdued due to the same set of factors as the previous quarter including slower Chinese EV market growth, cathode/battery performance challenges, US/China trade war and lower ESS demands following safety incidents. However, signs of strong long-term fundamentals continued to build.

The European Union reiterated their focus on the reduction of CO2 emissions which will result in more stringent penalties implemented in 2021. Capacity commitments of battery manufacturers continued to grow with ~2,026 GWh committed compared with ~292 GWh in 2019. Furthermore, several partnerships were announced including Toyota and CATL, Northvolt and VW, and LG Chem and Tesla demonstrating a commitment to accelerate battery technology development and EV adoption.

While weak market conditions have persisted longer than expected, a recovery is expected when the battery supply chain reaches more manageable inventory levels. A strong acceleration in market demand growth is expected in the medium to long term as EV manufacturing profitability improves, total cost of EV ownership lowers and battery technology objectives within the EV and ESS segments including energy density, range and safety are achieved.

Outside of Europe and China, India's government has introduced a series of initiatives leveraging a significant budget of US$1.5 billion over three years to develop a battery supply chain. Meanwhile the US and Australian governments remain in discussions to develop battery supply chains domestically.