The fall in the price of lithium over the past year has been as dramatic as its rise, and it’s likely not over yet.
The reference price in China for battery material has so far fallen by nearly 80% from its all-time high recorded in November 2022. At the time, lithium miners were enjoying auspicious profits and automakers were complaining about rising costs.
Now, the sharp decline in lithium, together with sharp falls in nickel and cobalt, are driving battery prices to historic lowsaccording to BloombergNEF.
For at least the next year, it appears, automakers will be able to check lithium costs off the list of big concerns as prices come under pressure from a wave of new supply.
“Prices are still substantially above levels needed to balance the market,” analysts at Goldman Sachs Group Inc. wrote this week in a note.
The declaration of “commodities” would be key to the transparency of the lithium market
Half of market participants surveyed by BNEF believe prices will fall further next year, and only 11% expect profits. The industrial consultancy Benchmark Mineral Intelligence estimates that the global lithium market will not record deficits again until 2028.
Lithium’s pullback has been driven by rapid expansion in production, especially from relatively low-grade mines in China that have surprised the market with their rapid growth. Slower expansions, or outright production cuts, may be needed to stabilize prices.
Top lithium miner Albemarle Corp. has said this is already starting to happen, as prices have reached levels that threaten a number of higher-cost projects.
Weak lithium demand
Obviously, demand is also an issue. While global sales of electric vehicles continue to grow at a rapid pace, are not expanding as quickly as many in the industry expected amid economic uncertainty in China, rising borrowing costs and inflation affecting consumers in other major economies.
Mining company SQM maintained its lithium demand estimate despite drops in revenue
That weakness in demand is wreaking havoc on an overly diversified supply chain. Electric vehicle manufacturers are waging price wars, there is a glut of batteries and surplus battery materials and components. The price of nickel fell this week to its lowest level in more than two years.
The lithium crisis has already made some stocks in the mining sector cheaper. The Global
However, For low-margin automakers, a world with too much lithium is a blessing. It supports the rampant increase in battery capacity needed for more widespread adoption of electric vehicles, and gives manufacturers leeway to appeal to price-conscious consumers.
Translated by Bárbara Briceño.