Article: The fall in lithium prices continues, what consequences for the electric battery industry?
For the past year, the prices of lithium, an essential metal in the manufacture of electric batteries, have continued to fall. Indeed, lithium carbonate, a semi-processed form of the metal, saw a 75% decline over the year. This downward trend has accelerated in recent weeks, with a drop of 20% in just one month. Thus, lithium prices have returned to their August 2021 level.
This decrease in prices is explained by a combination of two factors: abundant supply and relatively low demand. Currently, there are more than 200 lithium projects around the world, around 40 of which require financing. In addition, several lithium giants have invested to increase their production capacities. For example, Mineral Resources, the world’s second largest producer of spodumene, plans to double its production in Australia.
However, global demand for lithium has not experienced the expected explosion. High interest rates and economic uncertainty are holding back the sale of electric vehicles, the main market for lithium. China, in particular, where the greatest demand for electric cars is, has also suffered an economic slowdown.
Additionally, the emergence of new battery technologies, such as sodium batteries, could also change the demand for lithium. China and Europe are developing these alternative batteries, which could reduce dependence on lithium.
In this context, the world’s second largest lithium producer, SQM, does not rule out a further drop in prices in the coming weeks. According to estimates from consultancy Benchmark Mineral Intelligence, the lithium market could be in surplus until 2028.
This drop in lithium prices could have significant consequences for the electric battery industry. Indeed, if prices remain low, this could encourage the adoption of electric vehicles by reducing their production costs. However, this could also affect the margins of lithium producers and dampen investments in new mining projects.
In conclusion, the fall in lithium prices continues, mainly due to abundant supply and relatively low demand. This trend could have an impact on the electric battery industry, by reducing production costs, but also by affecting the margins of lithium producers. The emergence of new battery technologies, such as sodium batteries, may also influence lithium demand in the coming years.