Lithium prices plunge, market supply expected to be sufficient
Lithium prices are falling on global markets. Analysts point to an oversupply and the slower-than-expected development of e-mobility in the United States. Falling prices are threatening selected mining companies in Australia and China. However, according to the Australian government, prices remain above the production costs of major producers.
Lithium prices have plunged by 85% over the past year. With the exception of a brief period between April and June 2023, they have been falling continuously since November 2022. During that period, the price reached a record high of USD 37,000 per tonne. At the end of December 2023, it stood at around USD 13,600 per tonne. Some institutions expect prices to remain at current levels.
"Prices are not expected to return to previous highs, such as those seen in 2022 and early 2023, before 2025, due to the anticipated supply surplus," the Australian Department of Industry, Science and Resources said.
Analyses predicting this market trend point in particular to growing inventories of the metal and ample supply on the global market. They also point to an expected slowdown in demand for the raw material from China and the development of the electric vehicle market in the United States, which is so far well below initial expectations. In 2023, around 970,000 electric vehicles were sold in the US, accounting for just 5.7% of total vehicle sales in the country.
"With lithium supply set to grow further next year, we are likely to see prices fall further," BloombergNEF analyst Allan Ray Restauro said at the end of November 2023. "On the demand side, some regional disparities in electric vehicle sales are dragging down sentiment across the industry."A range of other factors may also be contributing to the decline in the price of the raw material. One example is the ongoing development of battery technologies that require different materials to manufacture. Chinese company CATL, one of the world's largest manufacturers, is also working on developing these batteries.
Some producers suspend operations, but most continue
Falling prices have already begun to affect some mining companies. Core Lithium, the only lithium producer in Australia's Northern Territory, has halted mining and warned of a major impairment to the value of its assets. Earlier this year, some producers in China also cut production.
However, according to Australian authorities, most producers will remain profitable at these prices and continue production. The five largest lithium producers, which account for 99% of Australia's spodumene production, reported average production costs of A$670 to A$1,225 per tonne of lithium in the 2022-23 financial year, the government said.
By contrast, Core chief executive Gareth Manderson said other miners would inevitably face difficult decisions about suspending operations. "At these prices, from what I know, others are also coming under pressure," he said. Analyses conducted by the company indicate that some mines in the country are also loss-making or under pressure.
Profitability depends on the raw material and the methods used to extract lithium. The company is primarily engaged in producing and selling spodumene concentrate, a feedstock used to produce lithium carbonate and hydroxide. The company only began selling the product in 2023 and is therefore not a long-established market player.
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