Lithium prices find stability in 2024 YTD with new pricing floor
Lithium prices have stabilized since the start of 2024 as producers decrease output amid stubbornly slow demand growth from the electric vehicle sector, analysts told S&P Global Commodity Insights.
The lithium carbonate price was $13,850 per metric ton CIF Asia on May 29, staying within a price band of between $15,500 and the May 29 price since Feb. 7, according to S&P Global Market Intelligence data.
The market has now largely wiped out a spike in lithium prices from 2022 and 2023 when there were concerns that there would not be enough of the silvery metal to produce lithium-ion batteries. The May 29 price is 79.2% below the high of $66,500/t reached on Feb. 22, 2023.
Lithium prices have fallen as the EV sector, the largest market for lithium batteries, slowed while more supply has steadily come online.
The new downcycle has left producers scrambling to protect margins and the lithium price itself, creating a new pricing floor.
“Lithium prices have stabilized since the start of the year at a new post-boom bottom,” Alice Yu, an analyst at S&P Global Commodity Insights, said in an email. The stabilization has been caused by “mine production cuts and the end of widespread lithium destocking by consumers,” Yu said.
Producers React
Lithium producers started slowing production at the end of 2023, which helped put the brakes on a price drop in January.
Sociedad Química y Minera de Chile SA said in November 2023 that it would hold back lithium and build inventories during low-demand periods, and Core Lithium Ltd. temporarily suspended open pit operations at the Finniss site in Australia in January. IGO Ltd. also outlined plans in late 2023 to stockpile supply in the second quarter of its fiscal 2024, comprising 25% of the lithium produced at its Greenbushes joint venture, also in Australia.
Several lithium producers including Albemarle Corp. and Mineral Resources Ltd. have taken to selling a portion of their output via auction, to secure higher prices than what has been assessed by price reporting agencies.
“This will enable producers to receive signs of a sustained price rebound more quickly,” Yu said.
Drowsy Demand
Demand growth has been slower than expected.
Demand for lithium chemicals is expected to grow by 29% in 2024, reaching 1.2 million metric tons of lithium carbonate equivalent (LCE), data from S&P Global Market Intelligence shows. But the market is still expected to record oversupply of 34,000 metric tons of LCE, according to forecasts by Commodity Insights.
The lithium market is expected to be in oversupply through 2027, forecasts by Commodity Insights show.
“On one hand, EV sales, particularly in China, are having several record-high months compared to previous years,” Federico Gay and Sophia Jang, analysts at Benchmark Mineral Intelligence, told Commodity Insights through email.
“On the other hand, it is true that EV sales are lower than previously anticipated, and inventories at a cell level are still considerably high, which have delayed some large procurement decisions,” the analysts added.
Price Recovery
Prices may be on a downcycle but the overall growth in demand, boosted by EVs, is still supporting prices compared to historical norms, and analysts expect a rebound.
“Lithium prices are trading more than double of the level seen at the bottom in the previous cycle, reflecting today’s higher cost structure,” Yu said.
Current prices are setting the market up for another swing as long-term demand fundamentals remain strong, according to producers.
Albemarle expects a slowdown in expansions to exacerbate supply deficits later this decade and Mineral Resources expects prices to increase over the course of 2024.
In the short term, Benchmark Mineral Intelligence expects prices to remain stable until July and will be keeping an eye out for a boost in EV sales due to new Chinese stimulus measures, interest rate cuts in the US, and the results of the US election in November.
Yu also expects demand to pick up in the second half of the year “from seasonal upside in the [plug-in electric vehicle] and electronic sectors and possible rate cuts,” the analyst said in a May 28 research report.
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