Article content continued

“We expect to see the peak in prices coming pretty soon,” said Robert Baylis, a lithium market analyst and managing director at London-based Roskill Information Services, who predicts prices will peak in the second quarter of 2017. “Normally these things don’t tend to last too long. You get a supply reaction in lithium. There’s more material coming on the market.”

So far, the big four have been producing below capacity even as prices rose, partly because lithium is a small part of their businesses. For example, FMC generated just 7.3 per cent of its revenue last year from lithium, with the rest coming mostly from chemicals used in agriculture, health and nutrition. But with new players jumping in, the top suppliers will be forced to expand output to protect market share, according to Macquarie Group Ltd.

Expanding Capacity

Philadelphia-based FMC announced last month it would expand its lithium hydroxide capacity after signing a new supply agreement with a “major manufacturer” of electric cars. By 2020, the company expects earnings from lithium will double from this year.

Demand for lithium remains strong. Tesla, a maker of electric vehicles that will start selling its Model 3 sedan late next year, is close to completing a giant battery plant in Nevada dubbed the “gigafactory.” Musk has sped up construction on the US$5 billion facility to meet his goal of making 500,000 cars by 2018. That means the plant, a venture with Panasonic Corp. that will boast the largest footprint of any building in the world, will need to be making batteries for cars by the end of this year.