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1、Determining the Price of MineralsA transfer pricing framework for lithiumLITHIUM IISD/OECD,2024.This publication is licensed under a Creative Commons Attribution 4.0 licence(CC-BY 4.0).Nothing in this license shall be construed as a waiver of the privileges and immunities that the OECD enjoys as an

2、international organisation.This work is published under the responsibility of IISD and the Secretary-General of the OECD.The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Member countries of the OECD or the IGF.The names and representation of c

3、ountries and territories used in this joint publication follow the practice of the OECD.This document,as well as any data and map included herein are without prejudice to the status of or sovereignty over any territory,to the delimitation of international frontiers and boundaries and to the name of

4、any territory,city or area.This practice note has been prepared under a program of cooperation between the Organisation for Economic Co-operation and Development(OECD)Centre for Tax Policy and Administration Secretariat and the Intergovernmental Forum on Mining,Minerals,Metals and Sustainable Develo

5、pment(IGF)as part of a wider effort to address the challenges developing countries are facing in raising revenue from their mining sectors,particularly on the topic of mineral pricing.It complements action by the Platform for Collaboration on Tax and others to produce practice notes on top-priority

6、tax issues facing developing countries.The OECDs work on this publication was co-funded by the governments of Germany,Ireland,Japan,Luxembourg,the Netherlands,Norway,Spain,Sweden,Switzerland,the United Kingdom,and the European Union.The IGFs work on this publication was funded by the Government of t

7、he United Kingdoms Foreign,Commonwealth and Development Office(FCDO).Its contents are the sole responsibility of the IGF and OECD and do not necessarily reflect the views of the governments funding the publication or the European Union.ABOUT THE AUTHORS Jaqueline Taquiri,Policy Advisor,Tax and Extra

8、ctive Industries at IGFThomas Lassourd,Senior Policy Advisor,Tax and Extractive Industries at IGFAndrew Viola,Senior Advisor,Transfer Pricing and Extractive Lead at the OECD ACKNOWLEDGEMENTSThe authors would like to thank Daniel Jimnez,Alejandro Echeverria,and Martin Sez from iLiMarkets;the Governme

9、nt of Argentina;and price-reporting agencies Argus Media,Asian Metals,Benchmark Mineral Intelligence,Fastmarkets,Shanghai Metal Market,and S&P Global Commodity Insights for their contributions to the research.OECD:https:/www.oecd.org/en/about/programmes/beps-in-mining.htmlIGF:www.igfmining.org/finan

10、cial-benefits/IISD HEAD OFFICE111 Lombard Avenue Suite 325 Winnipeg,Manitoba Canada R3B 0T4 IISD.orgX IISD_newsIGF/IISD OTTAWA OFFICE123 Slater Street Suite 1001 Ottawa,Ontario Canada K1P 5G4IGFMining.org X IGFMiningOECD HEAD OFFICE2,rue Andr Pascal 75775 Paris Cedex 16 FranceOECD.org X OECDiiiDeter

11、mining the Price of Minerals:A transfer pricing framework for lithiumTABLE OF CONTENTSIntroduction.1About This Schedule.1Framework:Using the comparable uncontrolled price method to determine the price of minerals sold .1Application to Lithium.3Lithium and Market Conditions.4Physical Characteristics

12、of Lithium Deposits .4Lithium Production ProcessesConventional routes.9Lithium Production and Reserves.13Lithium Pricing Fundamentals .15Components for an Agreement for the Sale of Lithium.17Determining the Price of Lithium .21Lithium Price Indices .22Comparability Adjustments.33References.36Appendi

13、x A.Sources of Information for Lithium.41ivDetermining the Price of Minerals:A transfer pricing framework for lithiumList of FiguresFigure 1.The worlds largest producing lithium brine deposit,Salar de Atacama,Chile.7Figure 2.The worlds largest producing lithium minerals deposit,the Greenbushes Mine,

14、Australia.8Figure 3.Lithium production process from brinesprocess diagram.10Figure 4.Lithium production process from mineralsprocess diagram.12Figure 5.“Lithium Tree”:Sources and destination of lithium chemicals.13Figure 6.Electric vehicle sales per region(last 3 months LTM)from 2017 to 2023.15Figur

15、e 7.Argus Media lithium prices.24Figure 8.Asian Metals lithium prices.26Figure 9.BMI lithium prices.28Figure 10.Fastmarkets lithium price assessments.30List of TablesTable 1.Lithium resources by country(tonnes of contained lithium).5Table 2.Sources and chemical composition of lithium minerals.7Table

16、 3.Lithium production and reserves(in tonnes of contained lithium).13Table 4.The eight biggest lithium producers at mine site level(in kilo metric tonne kMT LCE)in 2023.14Table 5.Incoterms in lithium contracts.19Table 6.Argus Media lithium prices.23Table 7.Asian Metal lithium prices.25Table 8.Benchm

17、ark Mineral Intelligence lithium prices.27Table 9.Fastmarkets lithium price assessments.29Table 10.S&P Global Commodity Insights Platts lithium prices.31Table 11.SMM lithium prices(all price ranges including VAT).32Table 12.SMM lithium prices on September 28,2023.331Determining the Price of Minerals

18、:A transfer pricing framework for lithiumIntroductionAbout This ScheduleThis mineral pricing schedule complements the practice note Determining the Price of Minerals:A Transfer Pricing Framework(Viola et al.,2023).The practice note provides a framework to identify the primary economic factors that c

19、an influence the pricing of minerals(“mineral pricing framework”)using transfer pricing principles.This schedule shows how the framework can be applied to lithium brines and lithium minerals.Importantly,this mineral pricing schedule does not replace,alter,or affect the Organisation for Economic Co-o

20、peration and Development OECD Transfer Pricing Guidelines(TPGs)(OECD,2022)interpretation of Article 9 OECD Model Tax Convention(OECD,2017)or the application of countries domestic transfer pricing laws and the interpretation of those laws by the respective tax administration.Framework:Using the compa

21、rable uncontrolled price method to determine the price of minerals sold In applying the comparable uncontrolled price method to related-party mineral sales,the comparability factors or economically relevant characteristics outlined in Paragraph 1.36 of the 2022 OECD TPGs are to be considered.Paragra

22、ph 1.37 of the 2022 OECD TPGs further notes that the extent to which each factor is economically relevant in a particular transaction depends on the extent to which it would be taken into account by independent enterprises when evaluating the terms of the same transaction were it to occur between th

23、em.An accurate delineation of the arrangement should be undertaken in accordance with Chapter I of the 2022 OECD TPGs,considering all five comparability factors and the economically relevant characteristics of the transaction.Considering this,there are three primary comparability or economically rel

24、evant factors to consider that are particularly relevant when applying the comparable uncontrolled price method to scenarios involving related-party mineral sales.1 These are as follows:the characteristics of the product,such as the physical features and quality of the commodity;the economic circums

25、tances that existed at the time the sales agreement was entered intothat is,the period of the arrangement;and contractual terms,such as quantity transacted,transportation terms,payment terms,insurance,quotation periods,foreign exchange,and treatment and refining charges.Importantly,this framework is

26、 premised on the following overarching conditions:1.The associated mining enterprise(i.e.,the seller)is treated as a mining enterprise that is part of a larger multinational mining group.1 Even though only three comparability factors are explored in detail,it does not diminish the importance of the

27、other two comparability factors(business strategies and functional profile)when accurately delineating the transaction as outlined in the 2022 OECD TPGs.2Determining the Price of Minerals:A transfer pricing framework for lithium2.Being part of the multinational group,the mining enterprise would have

28、 access to knowledge and intelligence of the commodity market conditions from its sister companies or its parent entity.This market knowledge and intelligence should include an awareness that the producing mine is one of a finite number of production entities in the world,and it produces a finite re

29、source that is a primary source of value creation.3.It is on this basis that the associated mining enterprise,operating wholly independently,would assess all of the options realistically available to it with the full benefit of market intelligence and knowledge that the wider multinational enterpris

30、e group has access to and sell at the highest possible price,taking into account its commercial objectives.Application to Lithium4Determining the Price of Minerals:A transfer pricing framework for lithiumLithium and Market ConditionsThe lightest and most reactive of the alkali metals,lithium is a de

31、licate silver-white metal.This element is found in trace amounts in almost all brines,minerals,clays,and seawater(International Lithium Association,2023).Lithium is used predominantly for producing lithium-ion batteries.Given its characteristicshigh specific heat,high thermic capacity,low specific d

32、ensity,high voltage,and electric conductivity,which enable lithium to store and transmit energy.Lithium is well suited to power electric and hybrid vehicles,portable electronic devices,and renewable energy grid storage solutions.For electric vehicles,lithium is present in all cathode chemistries,rep

33、resenting between 75%and 85%of the cathode raw material cost to date.Lithium has industrial applications,such as ceramics and glass,lubricants and grease,metallurgy,continuous casting mould flux powders,air treatment,and medical instruments.According to the latest United States Geological Survey(USG

34、S),global end-use markets for lithium were estimated as follows:batteries,80%;ceramics and glass,7%;lubricating greases,4%;continuous casting mould flux powders,2%;air treatment,1%;medical,1%;and other uses,5%(U.S.Geological Survey,2023).Lithium is traded either in chemical form or as a concentrate.

35、The two dominant chemical forms of lithium on the global market are lithium carbonate and lithium hydroxide.Lithium-bearing minerals,such as spodumene,petalite and lepidolite,are mostly sold as concentrates and as direct shipping ore under certain market conditions.Physical Characteristics of Lithiu

36、m Deposits Currently,lithium can be extracted commercially from two types of deposits:brines and minerals(hard rocks).2 These types of deposits have different characteristics and geographical locations.As a result,the countries with the largest lithium resources are either countries with a majority

37、of brine deposits,such as Bolivia,Argentina,the United States,and Chile,or those with a majority of mineral deposits,such as Australia,China,or the Democratic Republic of the Congo(DRC).The following table provides an overview of the countries that host the largest lithium resources worldwide.Becaus

38、e not all of the countries on the list have developed their resources through exploration and development,the global list of lithium reserves,the part of the resources that are commercially recoverable in Table 2,looks somewhat different from this table.2 Lithium production from clays will not be co

39、mmercially significant until at least 2028.5Determining the Price of Minerals:A transfer pricing framework for lithiumTABLE 1.Lithium resources by country(tonnes of contained lithium)Country2023Bolivia23,000,000Argentina22,000,000United States14,000,000Chile11,000,000Australia8,700,000China6,800,000

40、Germany3,800,000DRC(Kinshasa)3,000,000Canada3,000,000Mexico1,700,000Czechia1,300,000Serbia1,200,000Russia1,000,000Peru1,000,000Mali890,000Brazil800,000Zimbabwe90,000Spain320,000Portugal270,000Namibia230,000Ghana200,000Finland68,000Austria60,000Kazakhstan50,000Total 104,478,000Source:Authors,based on

41、 data from United States Geological Survey,2023.6Determining the Price of Minerals:A transfer pricing framework for lithiumAlthough they contain lithium,some deposit types are not currently economically viable.Lithium,for instance,is present in some oilfield brines,as well as ocean brines in regions

42、 with geothermal activity,such as the western United States,Europe,New Zealand,and Iceland.Lithium is also present in certain sedimentary clays.Lithium production from oilfield brines,ocean brines,geothermal brines,and clays is still being investigated(International Lithium Association,2023).Lithium

43、 BrinesBrines in salar deposits in South America(Bolivia,Chile,Argentina),the United States(Nevada),and the Chinese regions of Qinghai and Tibet contain high quantities of lithium.One of the main sources of lithium compounds is salar brines.Large,dry lake beds known as salars are found high up in va

44、st mountain ranges,where brines are found just beneath a layer of crusted salt deposits.In salars,which are closed or restricted drainage basins where the rate of evaporation exceeds the rate of precipitation,lithium brines are found.There are at least six common characteristics that provide indicat

45、ors of lithium brine deposit genesis:(a)arid climate;(b)closed basin containing a salar(salt crust),a salt lake,or both;(c)associated igneous and/or geothermal activity;(d)tectonically driven subsidence;(e)suitable lithium sources;and(f)sufficient time to concentrate brine(Munk et al.,2016).Lithium

46、brines are used to produce lithium carbonate out of concentrated lithium chloride.Some brines carbonate production is then processed further to produce lithium hydroxide.Chile,Argentina,and Bolivia hold the largest and richest deposits of lithium brines.The lithium brines deposit in the Salar de Ata

47、cama,Chile,stands out in terms of production.3 Argentina,however,holds the vast majority of salar deposits of different sizes and grades.Lithium brine deposits in China and the United States have lower grades and a higher level of impurities,such as magnesium.3 Sociedad Quimica y Minera de Chile rep

48、orts on production volume.See Solutions for Human Progress,n.d.7Determining the Price of Minerals:A transfer pricing framework for lithiumFIGURE 1.The worlds largest producing lithium brine deposit,Salar de Atacama,ChilePhoto credit:Nicolas Maennling.Lithium MineralsLithium in minerals is found in s

49、everal mineralization forms,such as lithium oxide(Li2O).The main lithium-bearing minerals found in pegmatites are spodumene,petalite,lepidolite,amblygonite/montebrasite,and eucryptite.While there are over 140 minerals containing lithium,only a few are commercial sources of lithium,including spodumen

50、e,petalite,and lepidolite.TABLE 2.Sources and chemical composition of lithium mineralsMineralChemical Composition%Li2OSpodumeneLi2OAl2O3(SiO2)48LepidoliteK(Li,Al)3(Si,Al)4O10(F,OH)27.7Polylithionite(Sonora)KLi2Al(Si4O10)(F,OH)27PetaliteLi2OAl2O3(SiO2)84.7Zinnwaldite(Cinovec)KLiFeAl(AlSi3)O(F,OH)2.19

51、-3.72Hectorite(Thacker Pass)Na0.3(Mg,Li)3Si4O10(OH)21.17Source:Authors,using data provided by iLiMarkets.8Determining the Price of Minerals:A transfer pricing framework for lithiumLithium deposits from pegmatites contain a concentration range of lithium oxide from 1%to over 4%(International Lithium

52、Association,2023).In terms of production,spodumene is the most significant mineral containing lithium.This is due to the large deposits,relatively high lithium content,and comparatively easy processing of the ores.Economically significant amounts of petalite and lepidolite are also recovered(Interna

53、tional Lithium Association,2023).The processing of their concentrates is different from that of spodumene concentrates.Many deposits contain both spodumene and petalite.In Africa,lithium minerals contain mostly petalite.Lepidolite is mostly produced in China.Spodumene is currently mostly produced in

54、 Australia.Western Australia and China are the most important suppliers of these hard rock minerals.China also plays a dominant role in the processing of mineral concentrates.Almost all of Australian spodumene is currently processed into chemicals in China.Other countries may play a larger role as s

55、uppliers in the future,such as Zimbabwe and the DRC in Africa and Brazil in the Americas.Until the middle of the 1990s,spodumene was the main source of lithium used to produce lithium carbonate.Nowadays,lithium carbonate and lithium hydroxide are made from roughly 60%and 40%of spodumene,respectively

56、.Lithium mineral concentrates are used to produce either lithium carbonate or lithium hydroxide.FIGURE 2.The worlds largest producing lithium minerals deposit,the Greenbushes Mine,AustraliaSource:Talison Lithium,n.d.9Determining the Price of Minerals:A transfer pricing framework for lithiumLithium P

57、roduction ProcessesConventional routesThe process to extract lithium and produce its chemical forms differs between brine and mineral extraction.Both can be economically viable.Brines and mineral extraction projects are found at different points of the lithium carbonate and lithium hydroxide cost cu

58、rves.The economic value of a lithium deposit is dictated by its behaviour in the different production processes.In general terms,lithium production leaves behind calcium,sodium,magnesium,potassium,boron,and other impurities that negatively affect the cost of refining the commercially valuable lithiu

59、m components.Lithium Brine ProductionLithium production from brines begins with the production of lithium chloride(LiCl)concentrate,which is then converted into lithium carbonate(Li2CO3)through a carbonization process.At an incremental cost,lithium hydroxide(LiOH)can be produced from lithium carbona

60、te.Lithium ConcentrationThe first phase of the lithium chemical production process is the evaporation and concentration of lithium,carried out in the evaporation ponds.The resulting brine concentrate is then sent to a chemical plant.Lithium concentration in the brine is key to a salars economic viab

61、ility(Gleeson,2017).The lithium concentration defines the concentration factor and evaporation area.The most attractive salars are those with high lithium concentration and evaporation rates and low sulphate,magnesium,and calcium quantities.Evaporation rates rely on elevation and local climate.Each

62、salar has a unique brine composition,which requires a specific flowsheet to recover the lithium.In addition,there are different conditions that can affect the technical and financial feasibility of exploiting a salar,such as climate,reservoir hydrogeology,reserves,infrastructure(electricity and acce

63、ssibility),and freshwater availability.Lithium brine production is characterized by the construction of pumping wells capable of extracting brine from different aquifers of interest.The brine extracted from each of the wells is accumulated in different gathering ponds that allow it to be distributed

64、 to evaporation ponds and,eventually,to metallurgical plants.There are few valuable by-products during this stage.As the brine moves through the ponds,different salts are precipitated.In the evaporation process,sulphate,potassium,calcium,and magnesium will concentrate together and must be removed be

65、fore lithium chloride can be precipitated.Some of these elements can be sold commercially depending on individual market feasibility(for example,potassium chloride from the Salar de Atacama projects in Chile).At the time of writing,most brine projects treat them as a waste product.10Determining the

66、Price of Minerals:A transfer pricing framework for lithiumLithium Carbonate ProductionThe second phase of the chemical process is carried out in the carbonate plant.To get purified brine,chemical treatments are applied to eliminate the traces of impurities remaining from the evaporation process,main

67、ly boron,magnesium,and calcium:boron:The brine is first pumped from the covered ponds to the solvent extraction plant in order to remove boron.The costs of reagents used in this stage,such as hydrochloric acid,sulphuric acid,and caustic soda,can be significant.magnesium:The end liquor and brine are

68、combined after the boron is extracted in order to precipitate the majority of the magnesium as magnesium carbonate.After filtering,the brine is transferred to the second stage of magnesium extraction.Magnesium is then reacted with a lime solution to precipitate the magnesium as magnesium hydroxide.T

69、he ratio of Mg/Li indicates how much magnesium must be removed.calcium:To produce lithium carbonate,it is also necessary to precipitate calcium as calcium carbonate and/or calcium hydroxide.Next,the purified brine is sent to the lithium carbonate plant.The major cost item in the production of lithiu

70、m carbonate is the consumption of soda ash.Soda ash consumption at the time of writing is around 1.9 tonnes per tonne of lithium carbonate.Lithium carbonate is precipitated by adding a soda ash solution to the purified lithium brine.After that,the lithium carbonate is dried after being filtered and

71、cleaned on a belt filter(Ehren&de Castro Alem,2013).Lithium carbonate plant yield is expected to be in the 75%80%range.A portion is expected to fail to meet the prescribed specifications or standards(10%20%),which requires further processing,either lithium carbonate refining or conversion into lithi

72、um hydroxide.FIGURE 3.Lithium production process from brinesprocess diagramSource:Authors,using data provided by iLiMarkets.11Determining the Price of Minerals:A transfer pricing framework for lithiumLithium Hydroxide Production From Lithium CarbonateThe main process of converting lithium carbonate

73、to lithium hydroxide is called the liming route.It starts by reacting lithium carbonate with calcium hydroxide,where lithium hydroxide is obtained in an aqueous state.Calcium carbonate is obtained,as well as waste.The yields of this process average 85%of lithium hydroxide in aqueous state.At high te

74、mperatures,this reaction yields a solution containing approximately 2.25%2.75%of lithium hydroxide monohydrate(LiOH*H2O).The insoluble residue(mainly calcium carbonate)is removed,and lithium hydroxide monohydrate is crystallized from the remaining solution by evaporation.After that,it is separated,a

75、nd the water can be carefully dried out to yield anhydrous lithium hydroxide.Lithium Minerals ProductionGranitic pegmatites contain the most significant lithium-bearing minerals,spodumene being the most significant.The following processes refer to lithium production from spodumene but mostly apply t

76、o other minerals like petalite and lepidolite.Lithium production from minerals can be divided into two segments:(i)mining and processing into concentrate forms and(ii)refining into chemical forms.Mining and processing of lithium minerals include extraction,milling processes,and dense media separatio

77、n.Every mine produces a different type of lithium mineral concentrate in terms of granulometry,grade,and contaminants.Refineries must be specifically fine-tuned to the concentrate they process.Refining requires the calcination and acidification of the mineral to produce an acidic solution of lithium

78、 sulphate(Li2SO4),which can be reacted to produce lithium carbonate or lithium hydroxide at a similar cost.This is a major difference with brines.From the production of minerals,lithium carbonate is not necessary to produce lithium hydroxide.Lithium Mining and Processing Once the ore has been extrac

79、ted by excavators and other mining vehicles,the concentration process starts by crushing the ore with high-pressure grinding rollers.Then,a dense media separator,deslime,and magnetic separation are used to remove impurities,including iron,mica,and dense grains.A flotation process can be added to pro

80、duce a finer product.The process yields are on the order of 70%to 75%,with the aim of producing spodumene with 5.5%to 6%of lithium oxide concentration.The concentration plant is located at the mine sites,which can be in remote areas.Transport costs can be a large cost component for lithium mineral c

81、oncentrates.In Australia,some deposits are located as far as 500 km from the closest port,accessible by rail or truck.Assuming a transport cost of about USD 10/tonne per 100 km,this can add up to USD 4050/tonne to the cost of spodumene exports.12Determining the Price of Minerals:A transfer pricing f

82、ramework for lithiumRefining Lithium Carbonate From SpodumeneSpodumene concentrate is roasted at high temperatures to convert it to a more soluble form,specifically above 1,000C to convert-spodumene to-spodumene.4 The spodumene is then ground and mixed with sulphuric acid to extract the lithium.The

83、lithium sulphate obtained is solubilized by leaching with water.The resulting solution can then be purified through a series of processes,including precipitation,filtration,and ion exchange to remove impurities such as iron,magnesium,and calcium.Lithium carbonate is then precipitated out of the puri

84、fied solution using soda ash treatment.The amount of soda ash required for this process is similar to that required for refining lithium carbonate from lithium chloride in brines.The lithium carbonate is filtered,dried,and packaged for sale.The operating costs of the refining process are largely dep

85、endent on the prices of spodumene,sulphuric acid,soda ash,and energy(Azevedo et al.,2018).Refining Lithium Hydroxide From Spodumene The refining process is the same as for lithium carbonate up to the ion exchange columns.Sodium hydroxide is then added to convert the lithium sulphate into lithium hyd

86、roxide and generate sodium sulphate,which is crystallized.The yield is in the order of 80%85%Li.An important operating cost component is the cost of handling/transporting the solid waste from the refinery:1012 tonnes of waste per tonne of lithium hydroxide.This requires either significant areas dedi

87、cated to waste dumping at the refining plant or additional logistical costs for the waste to be transported elsewhere.FIGURE 4.Lithium production process from mineralsprocess diagramSource:Authors,using data provided by iLiMarkets.4 Alpha spodumene is the natural crystalline form(monoclinal)where Li

88、 is more heavily bound with other elements,whereas the beta spodumene is tetragonal,making the Li extraction easier.13Determining the Price of Minerals:A transfer pricing framework for lithiumLithium Production and ReservesThe following table provides an overview of the top lithium-producing countri

89、es and reserves.Lithium production is still relatively small and concentrated but is expected to grow rapidly in the next decade.Six lithium mineral operations in Australia,one mineral tailings operation in Brazil,two lithium brine operations each in Argentina and Chile,and three mineral and two bri

90、ne operations in China accounted for the majority of global lithium production in 2023(United States Geological Survey,2023).In recent years,lithium minerals have taken a growing share of the total lithium market.In 2022,lithium brines represented approximately 46%of the worlds lithium production,an

91、d lithium minerals represented 54%.FIGURE 5.“Lithium Tree”:Sources and destination of lithium chemicalsSource:Authors,using data provided by iLiMarkets.In 2023,production of lithium from brines was dominated by Chile(64%),China(22%),and Argentina(12%).Australia and China were the main producers of l

92、ithium from minerals.TABLE 3.Lithium production and reserves(in tonnes of contained lithium)Country2020202120222023ReservesArgentina5,9005,9706,5909,6003,600,000Australia39,70055,30074,70086,0006,200,000Brazil1,4201,7002,6304,900390,000CanadaN/A-5203,400930,000Chile21,50028,30038,00044,0009,300,000C

93、hina13,30014,00022,60033,0003,000,00014Determining the Price of Minerals:A transfer pricing framework for lithiumCountry2020202120222023ReservesPortugal34890038038060,000United States-1,100,000Zimbabwe4177101,0303,400310,000-2,800,000World total5 82,500107,000146,000180,00028,000,000Source:Authors b

94、ased on data from United States Geological Survey,2023.In 2023,six producers accounted for two thirds of global lithium carbonate equivalent(LCE)supply.Table 4 shows a 5-year outlook for LCE production.TABLE 4.The eight biggest lithium producers at mine site level(in kilo metric tonne kMT LCE)in 202

95、36Main lithium producersLCE minedHeadquartersMain origins of productionSociedad Quimica y Minera de Chile 170ChileChile,AustraliaAlbemarle175United StatesAustralia,Chile,United States Tianqi90ChinaChina,AustraliaPilbara60AustraliaAustraliaMineral Resources50AustraliaAustraliaAllkem35AustraliaArgenti

96、na,Canada,AustraliaGanfeng30ChinaChina,Australia,Argentina Livent20United StatesArgentinaSource:Authors,based on data provided by iLiMarkets.Most companies involved in brine extraction are integrated into the sale of lithium chemicals(carbonate or hydroxide)to third parties.Most companies involved i

97、n lithium mineral extraction are integrated into the sale of mineral concentrate intermediates,such as spodumene.In China,there is a high level of concentration in the processing and refining of lithium chemicals.5 Rounded figures.6 Production estimate by iLiMarkets.One kMt is equal to 1,000 metric

98、tonnes or 1 million kilograms(United States Environmental Protection Agency,n.d.).15Determining the Price of Minerals:A transfer pricing framework for lithiumLithium Pricing Fundamentals Lithium chemicals are valued for their lithium content and purity,with the vast majority of lithium chemicals use

99、d for battery production.This means that demand for lithium has a close linkage to electric vehicles and,subsequently,battery production.Outside of batteries,lithium is used in other industrial applications,such as glass and ceramics,lithium grease lubricants,and aircraft construction.Growth in elec

100、tric vehicles continues to drive lithium demand.Global electric vehicle sales grew from 6.4 million in 2021 to 10.1 million in 2022(+60%)and reached 13.7 million in 2023.A million electric vehicles consume between 40 and 50 kMT LCE.7 During 2023,LCE consumption in electric vehicles has grown by arou

101、nd 150 kMT LCE.In 2023,China accounted for 60%of global electric vehicle sales.FIGURE 6.Electric vehicle sales per region(last 3 months LTM)from 2017 to 2023Source:Authors,using data provided by iLiMarkets.Governments are increasingly encouraging the transition to electric vehicles by combining ince

102、ntives with regulatory targets.Europe and China reduced subsidies in 2023,while the United States has offered consumers the possibility to claim as much as USD 7,500 in federal tax credits“if they purchase a clean-energy vehicle that satisfies certain US rules regarding critical minerals and battery

103、 components”(Inflation Reduction Act of 2022);its effects on demand are not yet clear.In 2022,lithium represented between 75%to 85%of the cathode raw material costs,and it is present in all cathode chemistries(lithium nickel,cobalt,manganese oxide NCM 111,NCM 523,NCM 622,NCM 811,lithium nickel-cobal

104、t-aluminum oxide,lithium nickel dioxide,lithium iron phosphate,lithium manganese oxide,and lithium manganese nickel oxide(LMNO)(Jimnez&Sez,2022).Lithium carbonate is used to produce low-nickel cathodes,a type of 7 Lithium carbonate equivalent.16Determining the Price of Minerals:A transfer pricing fr

105、amework for lithiumlithium-ion batteries commonly used for electric vehicles(i.e.,NCM).Lithium hydroxide is used to produce high-nickel cathodes.The respective demand for low-nickel cathodes and high-nickel cathodes is constantly changing.At the time of writing,low-nickel cathodes are being adopted

106、more widely(e.g.,by leading electric vehicle producers,such as Tesla),leading experts to expect higher demand for lithium carbonate than lithium hydroxide in the future.An important concept is the“lithium grade.”The grade refers to the quality of the lithium carbonate or lithium hydroxide and is dep

107、endent on the lithium purity,or concentration,and the level of impurities,also called the contaminant profile.Battery-grade lithium has a higher purity of lithium than technical-grade lithium,i.e.,99.5%vs 99%.Battery-grade lithium also generally has a lower level of impurities(i.e.,sodium,calcium,su

108、lphate,potassium,magnesium and chloride)and lower levels of magnetic particles(i.e.,Fe,Cr,Ni,Zn).In terms of particle size,micronized battery-grade lithium is common,as opposed to technical-grade lithium,more often found in the form of crystals or powder.A cathode producer might require technical-gr

109、ade(industrial-grade)or battery-grade lithium carbonate and hydroxide.The qualification processes differ:battery grades require longer qualification processes(i.e.,Initiative for Responsible Mining Assurance,International Organization for Standardization,and other certifications required by original

110、 equipment manufacturers).Refining lithium carbonate or hydroxide from technical grade to battery grade costs USD 1.52.5/kg on average,plus a yield loss of 3%5%.This does not always lead to an equivalent gap in spot prices.There is typically a spot-price gap between battery grade and technical grade

111、 of USD 12/kg,which can increase when the market is oversupplied and decrease when the market is undersupplied.Beyond the grade,there is no unique specification.Each cathode producer has specific requirements and a different contaminant profile,which are typically considered commercial secrets.Catho

112、de producers will try to buy the products whose contaminant profiles are acceptable for their production process and are consistent over time.The level of impurities will impact end users to varying degrees.For example,the iron content matters more for nickel-manganese-cobalt batteries than for lith

113、ium iron phosphate batteries.Refiners that produce lithium chemicals from minerals produce both carbonate and hydroxide.They are currently the marginal producers in the lithium production cost curve.The marginal costs of producing lithium carbonate and lithium hydroxide from spodumene are similar.Th

114、erefore,these marginal producers will produce whichever product sells at the highest price.Seeking to maximize prices,they balance the market to match the demand for each product.In other words,the current structure of the market leads to similar prices for lithium carbonate and hydroxide in the mai

115、n market of Asia.Typically,a lithium brine producer will generate a higher profit margin if it produces lithium carbonate rather than lithium hydroxide.From an economic efficiency perspective,brine producers using conventional processes should only produce lithium carbonate.However,this is not alway

116、s the case.Producers might want to diversify their customers,and vice versa,and some countries may make commercial choices to secure their place in the electric battery value chain.Although the demand for lithium seems sustainable,there are some risks from non-lithium-ion batteries.For instance,in F

117、ebruary 2023,Hina Battery and Sehol unveiled the first test vehicle with sodium-ion batteries(Kang,2023).Hydrogen and flow vanadium are other,albeit less likely,alternatives.17Determining the Price of Minerals:A transfer pricing framework for lithiumHigh lithium prices represent an increased recycli

118、ng incentive.Recycling is expected to be a relevant source of supply from 2027 onward once used lithium-ion batteries start to become available.Beyond 2030,recycling should account for an ever-increasing percentage of the total supply of lithium.The growth of the supply of primary lithium is therefo

119、re likely to decrease in the 2030s.Components for an Agreement for the Sale of Lithium Lithium can be sold either in chemical form directly to cathode producers or in mineral or concentrate form to be refined into a chemical form.A very small percentage of lithium from brines is sold as lithium chlo

120、ride concentrate to producers of specialty products like butyllithium.Such products are typically sold under a fixed price on long-term contracts and are outside the scope of this report.Lithium is mostly consumed in the form of either lithium carbonate or lithium hydroxide.There is currently a larg

121、e and growing market for these products,which are gradually being standardized.Although product customization for each customer is still the norm,especially for trace impurities,there has been a convergence in the limits of“typical”impurities in lithium carbonate and lithium hydroxide.The main lithi

122、um chemical producers are now able to produce a quality acceptable to most users.Therefore,buyers can source their lithium chemicals from an increasing number of sources,and sellers can sell their lithium chemicals to different customers.Lithium is increasingly being sold as spodumene concentrate.Th

123、e number of mineral refiners in China has increased,leading to a growing market for mineral concentrate imported from Australia,Africa,and Brazil for its conversion into lithium chemicals.As with any mineral product,the terms and conditions that impact the price of a sales and purchase agreement are

124、 specific to that commodity.Lithium prices have historically been a one-on-one negotiation between the buyer(a plant that uses lithium products)and the seller(a production entity),with limited space for independent traders.This could change in the future as the market develops,but it will depend on

125、the respective market structure of the producers and buyers of lithium chemicals and mineral concentrates.There are many forms of contracts for the sale and purchase of lithium.This section attempts to describe the main elements of these contracts between independent parties to assist tax administra

126、tions in applying the arms-length principle.As outlined earlier in this toolkit,this mineral pricing schedule does not replace,supersede,alter,or affect the 2022 OECD TPGs and should be read in conjunction with the main mineral pricing toolkit(Viola et al.,2023).Sale and purchase contracts or agreem

127、ents for lithium chemicals have the same structure but will contain different terms and conditions than those for lithium mineral concentrates because the product is different,as are the parties involved.They are,therefore,reviewed separately below.Regardless of the type of lithium product,buyers re

128、quest representative samples and check metallurgical and mineralogical characteristics before importing lithium chemicals,concentrates,or minerals.These characteristics are the basis of the contract and price negotiations.18Determining the Price of Minerals:A transfer pricing framework for lithiumLi

129、thium ChemicalsLithium carbonate and lithium hydroxide(monohydrate)are both used as inputs into cathodes for batteries,with similar lithium content(19%and 16.5%,respectively)and similar pricing mechanisms.Although the analysis in the following section tends to focus on lithium carbonate,most of it e

130、qually applies to lithium hydroxide.The key components of a lithium chemical sales and purchase agreement are as follows:product description:whether it is lithium carbonate or lithium hydroxide:a cathode producer uses one or the other,depending on its specification.They are not interchangeable.batte

131、ry grade or technical grade.impurities that are required to be specified include:sodium,calcium,potassium,iron,chrome,nickel,zinc,copper,sulphate,and chloride.impurities specified upon request,normally not disclosed in the specifications,but discussed individually with customers,such as silica,alumi

132、na,lead,barium.other physical properties included in specifications:particle size distribution;metallic magnetic particles;humidity(not applicable to LiOH.H2O).there are no price adjustments for products that do not meet the contract specifications.The off-specification products could be rejected by

133、 the buyer,as they are restricted by the processes of the cathode producer.quantity involved:The quantity to be transferred from the seller to the buyer.Buyers and sellers typically engage in repeated sales and may increase the volume transacted over time.In principle,the volume transacted should im

134、pact price:a large buyer should be able to negotiate additional discounts.However,this has not always been the case in practice,as the price is usually determined by supply and demand factors.For example,in an undersupplied market,sellers have more options,and large buyers may be desperate to satisf

135、y their cathode production needs and therefore would be willing to pay a premium to secure additional volume.duration:determines whether it is a one-off,immediate(spot)sale,has a different delivery date(+30 days,+90 days,etc.),or is a contract for several batches at specific intervals over time(e.g.

136、,1 year,5 years).Many thousands of tonnes of lithium carbonate may be delivered on a multi-year contract,typically a 37-year contract.Typically,multi-year contract prices are negotiated periodically or linked to price indices.delivery terms:Depending on the arrangements negotiated between the buyer

137、and seller,lithium carbonate can be sold at the delivery port,dispatch port,or an intermediate location.Typically,cost,insurance,and freight(CIF),or free carrier(FCA)incoterms are used when shipments go to Asia.Ex Works(EXW)can also be used for shipments within China.The FCA and delivery duty paid(D

138、DP)incoterms are used when shipments go to Europe or North America.When contracts include variable prices with caps and floors,they typically use CIF multiple locations as a delivery condition.19Determining the Price of Minerals:A transfer pricing framework for lithiumTABLE 5.Incoterms in lithium co

139、ntractsCIFThe cost of insurance and freight,duty-free,to the specified port of destination is covered by the seller.As soon as the goods are placed inside the ship,risk is transferred.FCAThe buyer supplies the carrier,and the seller is in charge of delivering the item into their custody.As soon as l

140、oading occurs,risk is transferred.EXWThe seller is only responsible for making the goods available at the sellers premises.From that point on to the destination,the buyer assumes all risk.DDPIt is the sellers responsibility to transport the goods to the destination port,pay any applicable duties,and

141、 give the buyer access to them.As soon as the buyer has access to the goods and they are prepared for unloading at the designated location,risk is transferred.Source:Authors based on data from Trans Ocean Pacific,n.d.price:In contracts,sellers and buyers can agree to a price that is fixed,variable,o

142、r variable with caps and floors.fixed prices:Standard contracts used fixed prices until around 2016,while the market was relatively stable.Prices were fixed from 1 to 3 years.With high price volatility,these contracts became a bet on future prices,with one party winning and the other losing as a res

143、ult.Only a minority of contracts still used fixed contracts at the time of writing.variable prices:Sellers and buyers agree on a base price adjusted by an index,where the index is derived from assessments by leading price-reporting agencies(one or multiple,such as Benchmark Mineral Intelligence,Fast

144、markets,or S&P Global Commodity Insights)or trade statistics,plus/minus discount/premium from that index of-15%to+5%.The contract can specify a yearly,biannual,quarterly,or even monthly price update.Prices are usually linked to indices reported for previous period(s).Recent contracts use an average

145、of the prices from the 21st of the previous month to the 20th of the month of sale.variable prices with caps and floors:Where variable prices with caps and floors exist in contracts,the average duration is from 3 to 7 years.The base price is also adjusted by an index derived from assessments of pric

146、e-reporting agencies or trade statistics minus a discount or plus a premium(typically-15%to+5%).The cap becomes active if the variable price exceeds the cap price,and the floor becomes active if the variable price is lower than the floor price.There are price reviews if the cap or floor prices go ou

147、t of a certain previously agreed range.In general,in long-term contracts,there are clauses to review the price every 3 months or monthly.quotational period:When referring to a price index or assessment,the quotational period is subject to negotiation between the parties.Buyers and sellers may attemp

148、t to game the quotational period:for example,if the contract price is the lagged spot price from the previous quarter,the buyer may try to delay its purchase if the spot 20Determining the Price of Minerals:A transfer pricing framework for lithiumprice is going down.Newer contracts use different quot

149、ational periods to address this problem,such as monthly updates or quarterly averages.premiums or discounts:When referring to a price index or assessment,prices may include premiums or discounts above/below a price index or assessment.The quantum of any premium and discount is usually set by negotia

150、tions and the market dynamics of when the contract is entered into.Another factor is the contaminant profile of lithium carbonate or hydroxide,which is specific to a producer and should not vary over time,therefore the premium or discount is negotiated upfront in the contract between the buyer and t

151、he seller.If a product has a high level of contaminants,the producer will get a lower price for the lithium concentrate.A producer with a better-quality product has more options and can obtain a premium.payment conditions:These generally depend on the agreed delivery term.For instance,if the contrac

152、t uses CIF,payment should be made within 30 days of the shipping date;if the contract uses DDP,payments could be extended,such as 90 days of the delivery/invoicing date.Payments could be made against a letter of credit.Take or pay clauses and deliver or pay clauses are common contractual terms in li

153、thium chemical sales and purchase agreements.Lithium Mineral ConcentratesLithium minerals,such as spodumene,are sold by miners in the form of concentrate.They are an intermediate product.Buyers purchase the concentrate for its lithium content,and it is used in refineries to produce either lithium ca

154、rbonate or lithium hydroxide.Therefore,the payable mineral is the lithium oxide contained in the concentrate.type of mineral or concentrate.At the time of writing,most mineral concentrates sold are spodumene.In future,it is expected that more contracts will be entered into for petalite and lepidolit

155、e concentrates when refineries adjust their processes to be able to utilize these minerals,and miners develop these deposits.lithium oxide content is specified in contracts.It is the most important determinant of spodumene prices.The price can be adjusted upwards or downwards if the product differs

156、from the specification on a linear basis,as long as it meets a minimum threshold agreed between the parties,e.g.,5%of lithium oxide from spodumene or 2.5%of lithium oxide from lepidolites.specifications.There is no premium or penalties in the sale of lithium concentrate,like there is for copper or g

157、old concentrates,impurities,or valuable by-products.The price is based only on the lithium oxide content and is priced on a dry basis.The contaminants are important to determine if the specifications are met or not:if they are not,the product is rejected by the buyer.However,the buyer can negotiate

158、the lithium concentrate price based on a contaminant profile.In a lower price environment,buyers may also consider other factors than the contaminant profile,such as moisture and particle size,which may diverge from their target specifications.Other factors that influence the price of the lithium mi

159、neral concentrates could include incoterms,volume,quotational period,and duration,which do not differ substantially from lithium chemicals,besides the packing of the lithium mineral concentrates,which can be delivered in bulk.21Determining the Price of Minerals:A transfer pricing framework for lithi

160、umDetermining the Price of Lithium In the early 2000s,determining a price for lithium was inherently difficult due to the lack of global trade in lithium.In recent years,due to the growth of lithium chemical and concentrate trade,several pricing data agencies have started collecting price intelligen

161、ce and publishing lithium chemical and concentrate prices.Driven largely by Asian imports,the availability of pricing data has increased,thereby facilitating the price-discovery process and allowing the development of lithium price indices.Lithium pricing data is published by price-reporting agencie

162、s such as Argus Media,Asian Metals,Benchmark Mineral Intelligence,Fastmarkets,S&P Global Commodity Insights,and Shanghai Metal Market and can be accessible through a subscription.Price-reporting agencies have their own published methodology to develop spot and/or contract prices.The methodology is b

163、ased on a range of factors,such as actual third-party transactions,bids and offers,and market intelligencei.e.,calls and other communication methods,such as emails to buyers and sellers.Neither indicator is a perfect reflection of market prices,although this is expected to change as the market grows

164、 rapidly in coming years and the price indices become more reliable.Spot prices have long been based on a small volume of transactions.As of 2023,spot sales had been increasing,mostly within China,and into China,Japan,and Korea.In coming years,spot sales could increase significantly in various marke

165、ts as additional supply and buyers come online,which will make reported spot prices by price-reporting agencies more accurate reflections of market prices.The reported contract price may reflect actual prices in sales contracts,but these are composed of old and new contracts,some of which are based

166、on a fixed price,which might differ significantly depending on when they were negotiated,the volume involved,and the quality of the lithium sold.As such,reported contract prices tend to be significantly different than spot prices.This highlights that a relevant consideration when reviewing the prici

167、ng term is the period when the sale and purchase agreement was entered into.The availability of pricing indices themselves does not represent a substitute for an arms-length price that would be agreed between independent parties.It does,however,present a reliable starting point for price-discovery p

168、urposes.To determine whether it is appropriate to use such indices,it must be first established whether independent parties in negotiations use these indices and,if so,to what extent.From interviews with price-reporting agencies and market experts,it can be concluded that many buyers and sellers of

169、lithium chemicals and concentrates do use price indices in their negotiations.Depending on market conditions,a discount or a premium to the price index or assessment can be negotiated.For instance,discounts are often negotiated when the market conditions favour the buyer and premiums when market con

170、ditions favour the seller.Tax administrations should account for market conditions prevailing at the time of a transaction when using price indices as a basis for an arms-length price.22Determining the Price of Minerals:A transfer pricing framework for lithiumLithium Price Indices Price-reporting ag

171、encies report lithium chemicals and concentrate prices.These are Argus Media,Asian Metals,Benchmark Mineral Intelligence,Fastmarkets,S&P Global Commodity Insights,and Shanghai Metal Market.Almost all agencies publish spot-price assessments in importing countries,particularly China,Japan,and Korea.In

172、 China,they are able to distinguish between domestic sales,typically priced on a DDP incoterm basis,and imports,priced on a CIF basis.Agencies with access to knowledge of commercial contracts also report contract prices.Asian Metals and Benchmark Mineral Intelligence also publish free on board(FOB)p

173、rice assessments for some of the major exporting regions:North and South America,and,along with S&P Global Commodity Insights,Australia for spodumene exports.Because the lithium market is still relatively opaque and open trades are limited,some price-reporting agencies report assessments of price ra

174、nges or the middle of a price range rather than a single market price.Other price-reporting agencies report an assessment daily for certain price assessments,as they are confident there is enough liquidity in the market.These are price assessments,not price indices,strictly speaking.They are not obs

175、erved in a fully transparent market where most bids,offers,and transactions are public,like a metal exchange.The price-reporting agencies publish price assessments based on a range of factors,such as individual contacts or transactions,bids and offers,and communications with producers,buyers,sellers

176、,and other market agents.Through their networks,they have access to valuable information and produce price assessments following rigorous methodologies,most of them compliant with the International Organization of Securities Commission(IOSCO,n.d.).Full details of the price methodologies followed by

177、price-reporting agencies are published on their websites and/or available upon request.At the time of writing,the only markets large enough to produce reliable market assessments for lithium chemicals in price-reporting agencies publications are in Asia:China,Japan,and Korea,representing together ov

178、er 90%of traded volumes of lithium.Given the size of Australia as a producer of lithium mineral concentrate and the diversity of buyers,an FOB Australia price for spodumene concentrate may also represent a relatively liquid market.The lithium market is growing and evolving quickly.It is expected tha

179、t price-reporting agencies will keep adjusting their price methodologies as the market evolves.For example,growing producing regions may see dedicated FOB price indices,and growing buying regions may see new CIF,DDP,EXW,or other relevant price indices.Price assessments for deliveries in Europe and N

180、orth America that have been recently created may become more representative of market prices when these regions become more important buyers of lithium chemicals.Tax administrations should keep abreast of these developments.This means,for example,adjusting their transfer pricing analyses to market c

181、onditions applicable during an audit period or taking a forward-looking or flexible approach in negotiating advanced pricing arrangements or safe harbours.Argus MediaArgus is an important price-reporting agency recognized by a large number of commodity producers(Argus Media,n.d.-a).It is a more rece

182、nt publisher of lithium price assessments.In 2018,Argus introduced two fresh evaluations of lithium:lithium hydroxide,56.5%(battery 23Determining the Price of Minerals:A transfer pricing framework for lithiumgrade,FOB China)and lithium carbonate,99.5%(battery grade,CIF China).It now reports other li

183、thium chemicals and spodumene prices.Argus reports a distinct seaborne China price for lithium,having established that China is the biggest,if only,liquid spot market.All prices are reported on a spot basis only.Argus lithium price assessments are tailored for specific market conditions through dire

184、ct industry consultation.A methodological note for all battery materials is available on their website(Argus Media,n.d.-c).The process is similar to other price-reporting agencies.Argus collects information on transactions,bids and offers,and other market information to include spread values between

185、 grades,locations,timings,etc.The data is verified by price reporters and assessed and reviewed before publication.The main consumers of Argus lithium pricing assessments are producers and purchasers of raw lithium,as well as large-scale industrial buyers,especially automakers.Globally,businesses an

186、d governments use their data as benchmarks in the financial markets and to index physical trade.TABLE 6.Argus Media lithium pricesProductIncoterm UnitLocationFrequencyCarbonate 99.5%incl.VATEXWCNY/tonneChinadailyCarbonate 99.5%EXW China(ex-VAT)EXWUSD/kgChinadailyCarbonate 99.5%CIFUSD/kgChinatwice we

187、ekly Carbonate 99.5%CIF duty unpaidUSD/tonneJapan/KoreaweeklyHydroxide 56.5%incl.value-added tax(VAT)EXWCNY/tonneChinadailyHydroxide 56.5%EXW China(excl.VAT)EXWUSD/kgChinadailyHydroxide 56.5%FOB duty paidUSD/kgChinatwice weeklyHydroxide 56.5%CIF duty unpaidUSD/tonneJapan/KoreaweeklyConcentrate(spodu

188、mene)6%Li2O CIF ChinaCIF duty unpaidUSD/tonneChinaweeklyConcentrate(spodumene)6%Li2O FOB AustraliaFOB duty unpaidUSD/tonneAustraliaweeklySource:Authors based on data from Argus Media,n.d.-a.24Determining the Price of Minerals:A transfer pricing framework for lithiumFIGURE 7.Argus Media lithium price

189、sSource:T.Kavanagh,personal communication,September 2023.Asian MetalAsian Metal collects mineral and metal prices from direct phone communications with market participants:producers,consumers,traders,and governments.It includes prices of deals just closed,being closed,or under negotiation in the spo

190、t market(Asian Metal,n.d.).Asian Metal publishes lithium prices on a wide range of products.In particular,it publishes lithium metal prices,lithium chloride,lithium cobaltate,lithium manganate,and other battery inputs,such as lithium-nickel-cobalt-manganese oxide(LNCMO).Asian Metal produces a genera

191、l price methodology note applicable to all the minerals and metal prices published by the agency.The methodology is not publicly available but is available from the agency upon request.25Determining the Price of Minerals:A transfer pricing framework for lithiumTABLE 7.Asian Metal lithium pricesProdu

192、ctIncotermsUnitLocationFrequencyLithium carbonate:99%min.Delivered CNY/tonneChinaUnknownLithium carbonate:99.5%min.Delivered CNY/tonneChinaUnknownLithium carbonate:99.5%min.CIF USD/kgChinaUnknownLithium carbonate:99.5%min.Delivered USD/kgEUUnknownLithium carbonate:99.5%min.Delivered USD/kgUSUnknownL

193、ithium carbonate:99.5%min.FOB USD/kgSouth America United StatesUnknownLithium hydroxide monohydrate:LiOH 56.5%min.Delivered CNY/tonneChinaUnknownLithium hydroxide monohydrate:LiOH 56.5%min.magnets 0.0001%max.Delivered CNY/tonneChinaUnknownLithium hydroxide monohydrate:LiOH 56.5%min magnets 0.0001%ma

194、x.FOB USD/kgChinaUnknownLithium hydroxide monohydrate:LiOH 56.5%min.,magnets 0.0001%max.Delivered USD/kgSouth KoreaUnknownLithium metal:99%min.Delivered CNY/tonneChinaUnknownLithium metal:99.9%min.Delivered CNY/tonneChinaUnknownSpodumene:Li2O 6%min.CIF USD/tonneChinaUnknownLithium chloride:99.3%min.

195、Delivered CNY/tonneChinaUnknownLithium cobaltate:Co 60%min.Delivered CNY/kgChinaUnknownLithium manganate:Mn 58%Delivered CNY/tonneChinaUnknownLithium iron phosphate:Li 3.9%min.Delivered CNY/tonneChinaUnknownLNCMO,523 Delivered CNY/tonneChinaUnknownLNCMO,622 Delivered CNY/tonneChinaUnknownSource:Auth

196、ors based on date from Asian Metal,n.d.26Determining the Price of Minerals:A transfer pricing framework for lithiumFIGURE 8.Asian Metals lithium pricesSource:F.Gao,Asian Metals,personal communication,October 2,2023.Benchmark Mineral Intelligence(BMI)BMI is a price-reporting agency that specializes i

197、n the lithium and lithium-ion battery supply chain(Benchmark,n.d.-c).Established in 2014,BMI was designed to collect key lithium and battery raw material prices such as nickel,graphite,and cobalt and has reached important price-reporting standards(Benchmark,n.d.-a).It publishes a wide number of spot

198、 and contract price assessments totalling 16 grades9 on lithium carbonate,6 on lithium hydroxide,and 1 on spodumeneand a sustainable lithium price.Furthermore,BMI calculates the world average prices for lithium hydroxide and carbonate as well as a lithium chemical index that is weighted by market vo

199、lume traded as well as a similar weighted global lithium chemical index.BMI publishes a dedicated methodology on its lithium prices,with a detailed explanation of each price assessment(Benchmark,n.d.-b).Prices are assessed biweekly for contract prices and weekly for spot prices in the most liquid ma

200、rkets(EXW China and CIF Asia).The assessment follows an IOSCO-certified methodology8 that is uniquely designed for the lithium market,which is based on transactions recorded in the market,bids and offers,and confirmation from market participants.This is followed by an internal review process and a p

201、rocess for correction and revisions if required.BMI publishes the following lithium price assessments for lithium carbonate,lithium hydroxide,and spodumene.8 BMI is the only price-reporting agency to have all lithium grades assured to Type 2 standard,the highest form of assurance under IOSCO princip

202、les.27Determining the Price of Minerals:A transfer pricing framework for lithiumTABLE 8.Benchmark Mineral Intelligence lithium pricesProductIncotermTypeUnitLocationFrequencyLi2CO3 min.99.2%CIFCombinedUSD/tonneAsia(Japan,South Korea,China)WeeklyLi2CO3 min.99.2%CIFContractUSD/tonneAsia(Japan,South Kor

203、ea,China)FortnightlyLi2CO3 min.99.0%CIFSpot and contractUSD/tonneEuropeFortnightlyLi2CO3 min.99.0%CIFSpot and contractUSD/tonneNorth AmericaFortnightlyLi2CO3 min.99.0%FOBSpot and contractUSD/tonneSouth America FortnightlyLi2CO3 min.99.5%,battery gradeEXW,VAT IncludedSpotCNY/tonneChina(domestic)Weekl

204、yLi2CO3 min.99.0%,technical gradeEXW,VAT IncludedSpotCNY/tonneChina(domestic)WeeklyLi2CO3 min.99.0%,sustainableCIFSpotUSD/tonneAsia(Japan,South Korea,China)FortnightlyLi2CO3 min.99.0%Weighted averageSpot and contractUSD/tonneGlobalFortnightlyLiOH min.56.5%CIFSpotUSD/tonneAsia(Japan,South Korea,China

205、)WeeklyLiOH min.56.5%CIFContractUSD/tonneAsia(Japan,South Korea,China)FortnightlyLiOH min.55.0%CIFSpot and contractUSD/tonneEurope FortnightlyLiOH min.55.0%FOBSpot and contractUSD/tonneNorth AmericaFortnightlyLiOH min.56.5%EXW,VAT IncludedSpotCNY/tonneChina(domestic)WeeklyLiOH min.55.0%Weighted aver

206、ageSpot and contractUSD/tonneGlobalFortnightlySpodumene concentrate Li2O content 6.0%FOBSpot and contractUSD/tonneAustralia FortnightlySource:Authors based on data from Benchmark,n.d.-c.28Determining the Price of Minerals:A transfer pricing framework for lithiumFIGURE 9.BMI lithium pricesSource:C.Ra

207、wles,BMI,personal communication,February 1,2024.FastmarketsFastmarkets is a price-reporting agency that reports lithium carbonate and lithium hydroxide price assessments on a North Asian(China/Japan/Korea)CIF basis,Europe DDP basis,and domestic China EXW(VAT included)basis since 2017(Fastmarkets,n.d

208、.-b).It also reports spodumene prices on a China CIF basis.Most spot prices are reported weekly,and contract prices are reported monthly,except the two most liquid markets,battery-grade lithium carbonate and lithium hydroxide,delivered China/Japan/Korea CIF,which are reported daily.Fastmarkets price

209、 methodology uses the following assessment price definition:“The prevailing level at which a commodity of stated specification has or could be expected to have transacted over a defined period of time”(Fastmarkets,2022).After collecting numerous data points on lithium transactionsas well as offers,b

210、ids,transactions heard second hand,and indicationsthey assign different weights to transactions depending on how confident they are that those data points reflect the open and competitive market,normalize prices for different types of commercial conditions,and discard the data points they have less

211、confidence in and deem less significant.Publication is done daily,weekly,or monthly,depending on the products,after a standardized peer review process,with opportunities for correction if required.29Determining the Price of Minerals:A transfer pricing framework for lithiumTABLE 9.Fastmarkets lithium

212、 price assessmentsProductIncoterm TypeUnitLocationFrequencyMin.99.5%Li2CO3,battery gradeCIFContractUSD/kgChina/Japan/KoreaMonthlyCIFSpotUSD/kgChina/Japan/KoreaDailyEXWSpotCNY/tonneDomestic ChinaWeeklyDDPContractUSD/kgEuropeMonthlyDDPSpotUSD/kgEuropeWeeklyMonohydrate 56.5%LiOH.H20 min.,battery gradeE

213、XWSpotCNY/tonneDomestic ChinaWeeklyCIFContractUSD/kgChina/Japan/KoreaMonthlyDDPContractUSD/kgEuropeMonthlyDDPSpotUSD/kgEuropeWeeklyCIFSpotUSD/kgChina/Japan/KoreaDailyMonohydrate 56.5%LiOH.H20 min.,technical and industrial gradesDDPContractUSD/kgEurope MonthlyDDPSpotUSD/kgEuropeWeeklyCIFContractUSD/k

214、gChina/Japan/KoreaMonthlyCIFSpotUSD/kgChina/Japan/KoreaWeeklyEXWSpotCNY/tonneDomestic ChinaWeekly0BMin.99%Li2CO3,technical and industrial gradesCIFContractUSD/kgChina/Japan/KoreaMonthlyCIFSpotUSD/kgChina/Japan/KoreaWeeklyEXWSpotCNY/tonneDomestic ChinaWeeklyDDPContractUSD/kgEuropeMonthlyDDPSpotUSD/kg

215、EuropeWeeklySpodumene min.6%Li2OCIFSpotUSD/tonneChinaFortnightlyCIFContractUSD/tonneChinaMonthlySource:Authors,based on data from Fastmarkets,n.d.-b.30Determining the Price of Minerals:A transfer pricing framework for lithiumFIGURE 10.Fastmarkets lithium price assessmentsSource:J.Yang,personal commu

216、nication,October 19,2023.S&P Global Commodity InsightsS&P Global Commodity Insights reports Platts lithium carbonate,lithium hydroxide,and spodumene prices(S&P Global,n.d.-c).Its lithium carbonate and hydroxide prices,which represent actual spot market prices for battery-grade material,are evaluated

217、 every day on a CIF North Asia,CIF Europe,and DDP China basis.Additional attributes are considered and could be adjusted to return to the base standard specifications of S&P Global Commodity Insights.The lithium spodumene price is assessed daily on an FOB Australia basis,reflecting physical spot mar

218、ket prices,with a minimum of 6%lithium oxide content exported from Western Australian ports.S&P Global Commodity Insights publishes its Platts general pricing methodology(S&P Global,2024a)as well as a price specifications guide for nonferrous metals(S&P Global,2024b).It collects information on bids/

219、offers and deals,verifies the information with market participants,normalizes prices when required,and discards non-representative data.It also publishes individual data points that are the basis for their assessment,such as actual transactions and bids and offers,so-called“heards,”accessible throug

220、h free registration(S&P Global,n.d.-b).31Determining the Price of Minerals:A transfer pricing framework for lithiumTABLE 10.S&P Global Commodity Insights Platts lithium pricesProductIncotermsUnitLocationFrequencyLithium carbonate min.99.5%Li2CO3 CIFUSD/tonneNorth AsiaDaily 16:30 SGLithium carbonate

221、min.99.5%Li2CO3 CIF(import parity)CNY/tonneNorth AsiaDaily 16:30 SGLithium carbonate min.99.5%Li2CO3 DDPCNY/tonneChinaDaily 16:30 SGLithium carbonate min.99.5%Li2CO3CIFUSD/tonneEuropeDaily 16:30 UKLithium hydroxide min.56.5%LiOHH20 CIFUSD/tonneNorth AsiaDaily 16:30 SGLithium hydroxide min.56.5%LiOHH

222、20 DDPCNY/tonneChinaDaily 16:30 SGLithium hydroxide min.56.5%LiOHH20 CIFUSD/tonneEuropeDaily 16:30 UKLithium spodumene min.6%Li20 FOBUSD/tonneAustraliaDaily 16:30 SGLithium spodumene 0.1%differential to spodumene 6%FOB AustraliaFOBUSD/tonneAustraliaDaily 16:30 SGSource:Authors based on S&P Global,n.

223、d.-c.Shanghai Metals MarketShanghai Metals Market(SMM)is a comprehensive online marketplace offering both ferrous and nonferrous metals(SMM,n.d.-a).Focused on the Asian markets,and the Chinese market in particular,SMM publishes price assessments for lithium carbonate and hydroxide,battery grade and

224、industrial grade,as well as lithium metal,spodumene concentrate,and different types of lithium-bearing minerals(SMM,2020).SMM publishes methodological notes for its different price indices,which include battery-grade lithium carbonate and lithium hydroxide(SMM,n.d.-b).For instance,for the SMM batter

225、y-grade lithium carbonate price index assessment,a note contains standards and management methods:“These standards are formulated to establish a transparent and verifiable SMM price setting mechanism and provide market participants with an important pricing reference”(SMM,2021).An SMM Price Administ

226、ration Committee provides oversight on the methodology and its implementation.SMM analysts collect price data information from multiple sources,confirm them with market participants,and assess/rank their reliability.They also discard non-reliable data.For example,“prices resulting from transactions

227、between affiliated enterprises,sell-offs under financial or legal pressure and any other non-repeatable trading practices.”They normalize the 32Determining the Price of Minerals:A transfer pricing framework for lithiumprice data in order to publish a spot-price index assessment.SMM price index meets

228、 IOSCO principles(SMM,2020).SMM publishes price assessments for other lithium products beyond battery-grade carbonate and hydroxide,which follows the same methodologies as other leading pricing indices.TABLE 11.SMM lithium prices(all price ranges including VAT)ProductIncotermsUnitLocationFrequencyLi

229、thium carbonate(99.2%industry level zero/domestic)EXWCNY/tonneChinaDailyLithium carbonate(99.5%battery grade/domestic),magnetic content 0.003%EXWCNY/tonneChinaDailyLithium hydroxide monohydrate(56.5%industry grade/domestic)EXWCNY/tonneChinaDailyLithium hydroxide monohydrate(56.5%,battery grade,coars

230、e particle/domestic),LiOHH2O98%,particle size of battery-grade lithium hydroxide is in the range of 300400 micronsEXWCNY/tonneChinaDailyLithium metal(99%,industrial,battery/domestic)EXWCNY/tonneChinaDailyLithium metal(battery grade):Li99.9%DDPCNY/tonneChinaDailySpodumene concentrate(6%,CIF China):Li

231、thium oxide 5.56%,prices converted proportionally 6%CIFUSD/tonneChinaDailyOther ore prices reported by SMM but not subject to a rigorous price assessment:spodumene(Li2O:1.2%-1.5%)(weekly update)(USD/mt)spodumene(Li2O:2%-2.5%)(weekly update)(USD/mt)spodumene(Li2O:3%-4%)(weekly update)(USD/mt)lepidoli

232、te(Li2O:1.5%-2.0%)(USD/mt)lepidolite(Li2O:2.0%-2.5%)(USD/mt)montebrasite(Li2O:6%-7%)(USD/mt)montebrasite(Li2O:7%-8%)(USD/mt)Source:Authors,based on data from SMM,n.d.33Determining the Price of Minerals:A transfer pricing framework for lithiumTABLE 12.SMM lithium prices on September 28,2023Source:K.Z

233、hu,personal communication,October 20,2023.Comparability AdjustmentsCharacteristics of the Product Lithium ChemicalsAs discussed in the section on commercial agreements,the most important determinant of the price of lithium carbonate or lithium hydroxide monohydrate,which are both used to produce bat

234、tery cathodes,is their specifications.Buyers buy a specific product(lithium carbonate or lithium hydroxide)of a given grade(battery or technical/industrial)with given specifications.It is critical that producers have a qualified quality assurance system for the lithium chemicals to be recognized as

235、battery grade in the market and priced accordingly.Otherwise,the product may have to be sold as a technical/industrial grade at a lower price,even if it meets the quality specifications of battery grade.If the product does not meet specifications as stipulated in the contract,the buyers can reject i

236、t.If the product meets the specifications,then the exact percentage of valuable material(lithium)or contaminants in a shipment does not affect the price.For example,if a contract provides for a lithium carbonate of a minimum 99.2%purity and the final product is 99.3%,the buyer does not receive a pri

237、ce premium for the higher purity.Or if a contract provides for a maximum amount of sodium,a contaminant,of 0.065%,the price is not affected if the final level of sodium is below this amountit is binary,i.e.,is the product within the specifications,as stipulated in the contract or not.Lithium Mineral

238、 ConcentratesAs discussed in the section on commercial agreements,the most important determinant of the price of lithium mineral concentrates is the content of lithium in the form of lithium oxide.34Determining the Price of Minerals:A transfer pricing framework for lithiumThe current practice for sp

239、odumene concentrates is to contract for a standard product of 6%Li2O,whose prices are transparent and published by price-reporting agencies,as documented in the earlier section.The price is then adjusted proportionally to the effective Li2O content as long as it is above a minimum amount,e.g.,5%.For

240、 example,if the lithium oxide content in a specific shipment of spodumene concentrate is 5.2%,then the price is discounted accordingly from the standard product of 6%Li2O.The adjustment is generally done in a linear manner,within a limited range.Outside of these limited ranges,the relationship betwe

241、en lithium oxide content and price is not linear.This is important to note as acceptable minimum lithium oxide content could be lower than 5%.As for lithium chemicals,if the product does not meet specifications,the buyers can reject it.However,the specifications are less strict for concentrates than

242、 for chemicals,as contaminants will be removed when concentrates are refined into either lithium carbonate or lithium hydroxide.Contaminants in the concentrates,and in lower price environments,other characteristics such as moisture and particle size,will generate discounts,as long as they meet contr

243、act specifications and there were no valuable,payable by-products at the time of writing.Economic CircumstancesAs outlined earlier,demand for clean energy sources,in the context of the energy transition and the increased demand for electric vehicles,directly impacts the lithium market.These economic

244、 factors led to the creation of lithium carbonate and lithium hydroxide price assessments.From a transfer pricing perspective,this allows tax administrations to account for the temporal factors arising from global supply and demand by referencing price assessments that correspond to the period in wh

245、ich related-party sales contracts are entered into and/or when the specific transactions occurred(i.e.,the date of when the good was sold if referencing an index assessment).This is particularly important,given that the current volatility of the lithium market and the relevant period in which the tr

246、ansaction occurred will have a significant bearing on the price.In short,by referencing a lithium price assessment from a reputable price-reporting agency,one is able to account for global supply and demand factors,as well as economically significant aspects of the producti.e.,its grade,purity,and s

247、pecifications.Factors around the general structure of the production entities might have a material bearing on the lithium prices.For several years,most lithium was produced by an oligopoly of producers:Albemarle,Sociedad Quimica y Minera de Chile,and Livent Corporation.Other producers have been add

248、ed to this list,including Chinas Tianqi Lithium and Allkem,based in Australia.Recently,both Livent and Allkem have announced their plan to merge to create a company that they forecast will have the worlds third-largest production capacity by 2027(Arcadium Lithium,n.d.).This will mean the existence o

249、f a few dominant players in the lithium industry that could be able to influence the market price of lithium.The general structure of the consumption entities should also be considered.At the time of writing,most large economies involved in the battery value chain had one to three major companies,wi

250、th fewer than a dozen significant cathode producers globally.This type of market structure,combined with the strategic nature of the battery supply chain and the intervention of governments to secure supplies,could have an impact on prices in the future.35Determining the Price of Minerals:A transfer

251、 pricing framework for lithiumThe production history,the general reliability of a lithium producer,and the size of the production mine itself may influence the price.Generally,a track record of stable production(including the stable quality of lithium)and larger mines can attract a premium on price.

252、Smaller or newly developed mines may offer discounts to attract buyers.This would be expected to decrease over time as a mine establishes its supplier credentials.For instance,it is common for new lithium producers to sell their lithium carbonate or hydroxide production as technical grade during the

253、 first few years of production while they refine their processes and learn to comply with battery-grade specifications.As a result,their earlier production is sold at a discount compared to the later,battery-grade production.Contractual TermsOutside of the factors discussed earlier in this framework

254、,the other economically significant adjustment relevant to the sale and purchase of lithium is the assignment of transportation responsibilities.The quantum of this adjustment is dependent on the product,volume,packing(i.e.,bulk vs big-bags)and the proximity of the mine or port to the chemical plant

255、.The other consideration is if the related-party trade is delivered into another port on a CIF basis.As mentioned,the only markets large enough for price-reporting agencies to produce reliable market assessments are in East Asia:China,Japan,and Korea.These price assessments use either CIF incoterms

256、for international sales or EXW for Chinese domestic sales.When using these assessments in the price-discovery process,tax administrations should take into account the cost of transportation from their countrys borders(i.e.,FOB)to the place of delivery used in the price assessments(i.e.,CIF).36Determ

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270、,Metals and Sustainable Development&Organisation for Economic Co-operation and Development.https:/www.oecd.org/en/publications/determining-the-price-of-minerals_de6ec0c5-en.html39Determining the Price of Minerals:A transfer pricing framework for lithiumFinancial Support for the OECD Comes From the F

271、ollowing Donors:40Determining the Price of Minerals:A transfer pricing framework for lithiumSupport for the IGF Comes From the Following:IGF Project FundersIGF Secretariat FundersIGF Secretariat Host41Determining the Price of Minerals:A transfer pricing framework for lithiumAppendix A.Sources of Inf

272、ormation for LithiumProviderUseReferenceArgus MediaLithium pricing information Argus Media,n.d.-bAsian MetalsLithium pricing informationAsian Metal,n.d.Benchmark Mineral Intelligence Lithium pricing informationBenchmark,n.d.-c FastmarketsLithium pricing informationFastmarkets,n.d.-a S&P Global Commo

273、dity InsightsPlatts Lithium pricing informationS&P Global,n.d.-aShanghai Metals MarketLithium pricing informationShanghai Metals Market,n.d.-a Platform for Collaboration on Tax(IMF,OECD,UN,&WBG)Additional information on commodity pricingOECD,n.d.USGSLithium production and reserves informationUnited

274、States Geological Survey,2023Note:Websites accessed in July 2023.Source:Authors.Determining the Price of Minerals:A transfer pricing framework for lithiumIn the mining sector,government revenue depends on mineral products being priced and measured accurately.This can be especially complex for semi-p

275、rocessed minerals such as lithium,which is primarily used for battery production.The schedule presented in this report applies the mineral pricing framework as documented in the joint OECD/IGF work Determining the Price of Minerals:A Transfer Pricing Framework to identify the primary economic factors that influence the price of lithium in applying the Comparable Uncontrolled Price method and ensure that developing countries are able to tax lithium exports appropriately.