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Prices down 70% in 12 months

Lithium at a three-year low: the electric car no longer runs

Use in batteries slows down, production more than doubles by 2020. So metal stocks are now piling up in warehouses. The price has plummeted by more than 70 per cent in the last twelve months, ending up below $13,000 per tonne, levels not touched since summer 2021

by Sissi Bellomo

3' min read

3' min read

White gold has stopped shining as it once did. Prices of lithium - the metal used in batteries - are even in free fall, depressed by overproduction accompanied by an (albeit relative) slowdown in demand. Lithium carbonate in particular is trading below USD 13,000 per tonne, lithium hydroxide is approaching USD 12,000: levels at which they have not fallen since July 2021, almost three years ago.

The decline over the past twelve months now exceeds 70 per cent, after a rebound between March and April that quickly petered out, and many analysts are now convinced that the price decline will continue, at least in the second half of this year, if not longer: an encouraging trend in some ways, as it eases the cost of a raw material that is indispensable for the energy transition.

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Among the causes behind the slump, however, is growing pessimism about the pace of the decarbonisation process and in particular about the spread of the electric car, which - especially in Europe and the United States - is disappointing the bombastic forecasts that were circulating until recently. Many Western car manufacturers are scaling back production development plans and battery supply agreements. BMW for example has just cancelled a $2 billion cell order with Northvolt.

In the first four months of this year, sales of full-electric vehicles increased by 10.6 per cent worldwide: 'a substantial year-on-year increase, but a marked slowdown compared to the 26.9 per cent growth rate of 2023,' Macquarie notes, although it does note an acceleration in hybrid registrations.

What is more, about 90% of the increase for 'pure' electric cars occurred in China: a country where by now 'the market is becoming mature, with a penetration rate of 67.9% in large cities in 2023 and a national average of 35.7%'. Ergo: new registrations even in China will slow growth for Macquarie, which forecasts +24.6% (from +30.2% in 2023).

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The duties on Chinese electric cars, recently imposed both by the US and by the EU, will also weigh on the market, with probable negative effects on the demand for materials used in batteries, starting with lithium, of which there is already a growing surplus.

Citi estimates an oversupply of 7 per cent of demand, which has already increased visible stocks by 70 thousand tonnes since the beginning of the year. For Macquarie, there are already as much as 92 thousand tonnes of lithium carbonate in the warehouses - a level never reached since specific data has been collected.

Accumulation accelerated in May, writes the Australian banka, mainly by refiners and traders (lithium is also traded on the stock exchange, at the Cme with futures that provide for cash settlement, but in China - at the Gfe or Guangzhou Futures Exchange - the underlying is physical).

"Low prices have restrained supply growth from 40% in 2023 to 18% in 2024, but we think a further slowdown is necessary," notes Citi, who believes that fundamentals can return to equilibrium in the next 3-6 months, on the back of a further 15-20% drop in prices to values around $10,000 per tonne. In 2025 there could be a recovery to $18-20 thousand, provided, however, that 'the current negative sentiment towards electric vehicles disappears'.

In 2022, the price of lithium flew well over USD 80,000 per tonne, in the belief that serious shortages would soon occur. It was precisely the steep price rises, however, that stimulated the market's response: production (in China and elsewhere) grew to more than one million tonnes of carbonate equivalent (LCE) in 2023, more than double the approximately 400,000 tonnes in 2020. Now the laws of the market may impose a brake.

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