Lithium price plummet due to continue

Battery metal oversupply and underperforming electric vehicle sales are part of the lithium price slide.

Lithium prices are expected to decline further because of rising supplies of the battery metal, subdued Chinese demand and a lacklustre American electric vehicle (EV) market.

Australia, which mined about half the world’s lithium in 2022, forecasts the spot price of spodumene will fall to $2,200 per tonne in 2025 from an estimated average of $3,840 per tonne last year, according to a quarterly report by the country’s Department of Industry, Science and Resources issued last month.

Lithium hydroxide, a refined version of the metal used in batteries, may decline to around $30,000 per tonne next year from an estimated average of $52,450 in 2023, the Department said. Lithium carbonate, a precursor to the hydroxide, was 96,500 yuan per tonne on Thursday, down from about 170,000 yuan in September, according to Trading Economics.

“Prices are not expected to return to previous high levels such as during 2022 and early 2023 before 2025 due to the forecast surplus in supply,” the Department said. “Some higher-cost producers, such as lepidolite miners in China, have become unprofitable and cut production. However, most lithium producers will remain profitable at current prices and continue to produce.”

The five largest lithium mines, accounting for 99% of Australian spodumene output, reported A$670 to A$1,225 average costs of production per tonne over the 2022–23 financial year, the government said.

The lower spot lithium prices may make electric vehicles and batteries less expensive but they could also hamper investment to develop battery metal mining projects needed for the wider transition to cleaner energy. That could delay consumer acceptance, thwart attempts to limit climate change and increase costs in the long run.

2022 record

Rising production has slashed the spot lithium price from the record 600,000 yuan per tonne in November 2022. Global lithium carbonate equivalent (LCE) extraction may reach 1.3 million tonnes this year and 1.65 million tonnes in 2025 from 1 million tonnes last year, according to the report.

Australia, the world’s largest lithium miner, is forecast to increase spodumene production to 633,000 tonnes LCE in 2025 from 386,000 tonnes in 2022. China is expected to more than double output to 373,000 tonnes next year from 166,000 tonnes in 2022. Chile plans to grow to 227,000 tonnes from 162,000 tonnes over the same period.

In North America alone, projects that may start construction this year include those by Albemarle (NYSE: ALB), Livent (NYSE: LTHM) Piedmont Lithium (NASDAQ: PLL; ASX: PLL), Lithium Americas, (TSX: LAC; NYSE: LAC) Standard Lithium (TSXV: SLI; NYSE-AM: SLI), Ioneer (NASDAQ: IONR; ASX: INR), EnergySource Minerals and Controlled Thermal Resources. Here’s a map of projects and offtake agreements.

China this week published its monthly Purchasing Managers’ Index survey showing factory activity fell in December to the lowest level in six months and its third straight report of shrinking orders. The world’s second-largest economy has faced lingering real estate turmoil, high youth joblessness and a national security crackdown on companies that has spooked international investors.

That may translate into nearly 200,000 fewer EV sales in the Asian nation this year for about 1 million total, Bloomberg New Energy Finance, a research unit of the newswire, said in a December report. Globally, automakers are expected to sell 16.7 million battery-electric and plug-in hybrid vehicles this year, BNEF said. That’s down about 4% or 775,000 cars from a June forecast because of sluggish China, higher interest rates in Europe, and slowing ambitions from General Motors, Ford and Tesla, it said.

Tesla fatigue

GM is discontinuing its most popular EV, the Chevrolet Volt, while Ford overestimated Mustang Mach-E and F-150 Lightning sales, Bloomberg NEF said. Tesla’s market lead is slipping as it suffers from a lack of new models and brand fatigue, it said.

The Elon Musk-led company is among US automakers hurting from high prices in the West vs. China, the Australia government said in its report. The two best-selling electric vehicles in China in 2022 were the Wuling Mini BEV at $6,500 and the BYD Dolphin for $16,000 while the Tesla Model Y was the most popular in Europe at $65,000 and in the US for $50,000. Even in China, Tesla’s Model Y cost 40% less than in the US last year.

“Chinese EV carmakers have focused on smaller and more affordable models, cutting down costs,” the Australians said. “In contrast, EV carmakers in Europe and the US have prioritized larger and more luxurious models to date. Recently, some US EV makers are reported to have begun making price cuts. However, this appears to largely be in response to the recent slowdown in sales as opposed to a broader shift to better affordability.”