Iran Claims World’s Second-Largest Lithium Deposit

Iran’s Ministry of Industry, Mines, and Trade claimed on Monday that the Iranian province of Hamedan holds 8.5 million tons of lithium.

This new reserve of lithium surpasses Chile’s 9.2 million metric tons of lithium, as recorded by the U.S. Geological Survey.

Lithium is essential for electric vehicle batteries, and its carbonate prices peaked at an all-time high of $86,170 per tonne last year before dropping to $52,500 per tonne this month, according to Oil Price.

-After #India now #Iran says that it has discovered a massive deposit of #Lithium
-Whopping 8.5 million tons
-If the claim is correct then this become the 2nd largest lithium reserve in the world after Chile (9.2 million tons) pic.twitter.com/Y6CYWcerqT

— Insightful Geopolitics (@InsightGL) March 7, 2023

Up and running in the coming two years

Director-General of the Ministry’s operations department, Ebrahim Ali Molabeigi, has confirmed that an investor for the mining site has been finalized. The mine is expected to commence operations within two years.

If the discovery is confirmed, it could be a significant boost for Iran. In the 21st century, lithium has emerged as a crucial commodity due to its usage in rechargeable batteries in electric vehicles and cell phones.

Lithium price fluctuations during the past months

Lithium carbonate prices in China have sunk to a 13-month low of CNY 365,500 per tonne, down 40% in the last three months. pic.twitter.com/5HjcUVjOse

— Sawyer Merritt (@SawyerMerritt) March 3, 2023

According to Credendo, in 2022 lithium prices experienced a significant surge, which eventually tapered off in December of that year. This upsurge was not directly linked to the Russian invasion of Ukraine but rather to a market that was experiencing high demand and low supply.

Despite Covid-19-related uncertainties in China, the price of lithium hydroxide dropped by 13%, while the price of lithium carbonate fell by 20% between the end of November 2022 (when it hit a record high) and mid-January 2023.

However, despite these recent fluctuations, the long-term drivers of the price of lithium remain intact.

As a result, a price floor is expected to persist, which is likely to remain above the historical average, despite the numerous ongoing lithium mining projects globally.

Lithium surplus in 2023

Bank of America Securities’ Head of Asia Pacific Basic Materials, Matty Zhao, has stated that higher supply volumes are set to surpass slowing demand for lithium in 2023, leading to a possible surplus of the metal.

According to Zhao, there is a significant amount of supply expected from lithium mines, which is expected to result in a 38% increase in lithium supply this year. Consequently, 2023 is likely to be a year of surplus lithium.

Additionally, Zhao predicts that China’s electric vehicle demand growth is set to slow down from 95% in the previous year to 22% in the current year. Lithium is an essential component of electric vehicle batteries, and Zhao highlights that the industry is becoming increasingly competitive.

As reported by Reuters, CATL is offering discounts to some of the Chinese automakers it supplies, assuming that lithium carbonate prices will reduce by half. Additionally, the company is providing targeted rebates. CATL counts Tesla, NIO Inc. (NYSE: NIO), and Volkswagen AG (OTCPK: VWAGY) among its largest clients.

However, the market is particularly worried about the inflow of fresh lithium supply. The looming supply from China, Australia, and Chile is likely to decrease prices further.

As analyst Dylan Kelly of Ord Minnett points out, “Supply is coming on stream faster than you can say ‘boo.’ Demand remains strong, but prices have been unsustainable for some time now”.