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Infographic: How Benchmark Mineral Intelligence analyzes lithium prices

Visual Capitalist created this sponsored content for Benchmark Mineral Intelligence.

Posted with permission of Visual Capitalist | August 19, 2019

Benchmark Mineral Intelligence analyzes lithium prices

 

Different generations find different uses for raw materials, changing the value of these inputs over time.

Lithium is not a new discovery, but its applications are. Scientists first discovered lithium as an element in 1817, but it was not until the 1970s that studies into lithium-ion batteries began.

It was a British chemist working for Exxon who first proposed the idea of a lithium-ion battery. However, after some initial testing, Exxon abandoned the project.

Nonetheless, lithium-ion battery technology has evolved into regular use through cellphones and electric vehicles. It offers an alternative to fossil fuels that global industry can run on.

Just as the world currently watches the price of oil to determine the trade winds, lithium could become just as important for the worldwide movement for clean energy.

Pricing the new oil

Traditionally, buyers and sellers have priced lithium through long-term contracts. However, in recent times, there has been a push from major end-users, especially automotive OEMs, to have more price transparency and to use third-party independent contract references in negotiations.

Benchmark Mineral Intelligence has created a standard for pricing the special lithium chemistry for the battery supply chain that the industry can rely on.

Supply and demand: Miners, manufacturers and end-users

Lithium is a hot commodity in the mining, manufacturing, energy storage and automobile industries today. The current size of the market is small, but the potential is huge.

In 2016, the world’s leading lithium battery companies produced 29 GWh of batteries. This production is forecast to grow to 1,049 GWh by 2028, an increase of 3,516%.

Data collection and price reporting

There are three cornerstone factors Benchmark uses to set the lithium industry’s reference price.

  • Quality and grade of lithium

  • Shipping costs and volumes

  • Quality and reliability of information

Let’s take a deeper look at each one:

1. Quality and grade of lithium

Most of the world’s lithium comes from two sources: mined from hard rock deposits of pegmatites, or pumped from lithium brine salars.

Grade and impurity of extracted lithium have unique profiles which will affect its price. Lithium is converted into different compounds: spodumene concentrate, lithium carbonate and lithium hydroxide.

These different varieties suit manufacturers’ exact specifications with different cost profiles.

2. Shipping costs and volumes

The origin and destination of lithium is an important choke point for pricing information. At these locations, “incoterms” are set rules that represent the destination and origin of the material, which in turn affects the cost of lithium.

3. Quality and reliability of information

In order to generate a lithium price, Benchmark embarks on the industry’s most rigorous price data collection process that relies on constant contact through e-mail, phone calls and in-person meetings.

Benchmark analysts evaluate the information received against volumes traded, the position of a company in the market and reliability of the source of information.

The results

Independent and accurate prices will be key as the lithium market grows, providing a solid foundation for contract negotiations and a level of transparency that will help attract capital to the market.

The varying nature of lithium chemicals makes it difficult to manage risk, but Benchmark is building a standard for pricing lithium to help manage this and set us off on a new era of energy.

Posted with permission of Visual Capitalist.

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