Experts at the Lithium & Battery Metals Conference in Perth, Western Australia, see several reasons why the lithium industry will consolidate, particularly among producers, in coming years.

Pilbara Minerals Ltd. CEO Ken Brinsden told delegates March 20 that he see a need for the world's major lithium producers tp buy smaller companies, particularly in the Pilbara.

He said the world's major lithium producers would have been surprised and disaffected by his company's rise in a short space of time, and the unlikelihood of there being another substantial lithium deposit in Western Australia, in particular, could prompt them into takeover mode.

Brinsden said the lack of potential for more major deposits was why Albemarle Corp. bought 50% of Mineral Resources Ltd.'s Wodgina lithium mine for US$1.15 billion.

He said such transactions show that the Pilbara region is "going to become such an important location that if you're one of the big guys, you have to have a footprint there."

Brinsden said lithium was the third-highest contributor to Western Australian government royalties behind gold, which it was certain to overtake, with iron ore a long way ahead.

Information provider IHS Markit's lithium and battery materials associate director, Nell Agate Tsui, said in a response to a question from S&P Global Market Intelligence that the surplus environment in lithium, which has pushed down prices, "should incentivize at least some sort of cost tightening measures."

However, it is yet to be seen whether that will translate into rationalization in the number of producers, she added.

While she is certain the response will come and would be quicker than what would generally be seen in base metals such as copper and aluminum, she cautioned that the lithium market could be a "completely different picture" in the next two to five years, so there is uncertainty in that regard.

S&P Global Platts Senior Pricing Specialist Joyce Zhang said her team's discussions with market participants have revealed that lithium hydroxide chemicals producers in China have already been consolidating as prices dropped in 2018.

"We've already seen a lot of Chinese chemicals producers suffering from huge costs and profit loss, and Chinese consumers are also expecting consolidation in lithium carbonate and hydroxide producers as they would like to see a higher quality of materials from the top tier producers," Zhang said.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.