Recent spate of transactions likely to continue until the supply-demand balance matures to levels that incorporate the mineral demand for electric vehicles

MELBOURNE — (September 10, 2019) ― L.E.K. Consulting today released a report analysing the strategies of lithium ion battery chemical and cell fabricators. The past few years have seen a large number of transactions that create a vertically integrated position in the markets for battery-based minerals such as lithium, cobalt, graphite and nickel.

Key findings from the report include:

  • The supply-demand and pricing in the lithium market is currently showing signs of “immaturity,” as the market adapts to the new environment with large scale demand for lithium used in battery manufacturing.
  • This environment of immaturity is likely to continue until demand growth shifts downward towards single digits per annum (p.a.) instead of the current expectations of c. 20% p.a.
  • Chemical and battery manufacturers are being driven to vertically integrate into mining positions by a desire for supply certainty, either directly (via equity) or indirectly (via offtake).
  • Mining companies are being driven to vertically integrate into refining or battery assets by a desire for exposure to higher value-added products.

The report also highlights a number of things for participants to consider in order to ensure that they capture the full value of a vertically integrated strategy, including:

  • Ensuring that the optimal operating model and investment horizon for the integrated business is established.
  • Developing a clear set of guidelines for integration that considers the options for acquiring any new required capabilities, as well as providing a basis for integration decision-making.
  • Identifying the strategic benefits of vertical integration during due diligence in order to secure them as part of the post-merger integration process.

“Vertical integration is an attractive strategy for battery mineral miners and users in the current environment, and there are significant value benefits to be found in successful implementation,” says Phil Wheeler, partner at L.E.K. Consulting and report author. “Our review suggests that the rationale for transactions will continue for some time, and while recent commodity price weakness will impact valuations and is reflective of the market immaturity, it should only result in a temporary hiatus in transactions.”

Note to editors:

L.E.K. Consulting considers “upstream” positions to be focused on mineral exploration, extraction, processing and shipment to customers. “Downstream” positions are related to battery chemical refining and precursor manufacturing, and battery fabrication.

About L.E.K. Consulting
L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions, deliver improved business performance and create greater shareholder returns. The firm advises and supports global companies that are leaders in their industries — including the largest private- and public-sector organisations, private equity firms, and emerging entrepreneurial businesses. Founded in 1983, L.E.K. employs more than 1,400 professionals across the Americas, Asia-Pacific and Europe. For more information, go to