LITHIUM PRICE DROPS 30 PERCENT FROM NOVEMBER RECORD

Lithium battery pack

In China, the price of lithium carbonate—essential in electric vehicle (EV) batteries—has fallen more than 29 percent to $61,795 per ton last week from its November record price above $87,000, analysis firm Fastmarkets reported.

EV demand in China, which bought one of every two EVs sold in the world last year, has waned this year as the export economy has slumped and consumer spending remains weak.

CATL, China’s largest EV battery maker, recently signed supply contracts with auto companies at discounted prices, according to Reuters.

“There has been persistent weakness in China,” Jordan Roberts, Fastmarkets’ lithium specialist, told the Financial Times. “The market is waiting to see the impact from the reduced subsidies” Beijing has offered to buyers of so-called “new energy” vehicles.

Sales of those new energy vehicles, which include hybrid as well as all-electric cars, shrank by 6.3 percent to 408,000 in January, compared with the same month in 2021, the China Passenger Car Association said.

Markets also are “concerned by low household confidence, which is tied to the country’s property crisis,” he added.

With EV sales also tumbling in Germany and Norway after governments slashed subsidies, “within the automotive industry there is some consensus that the rapid growth observed in 2021 and 2022 may not be seen this year,” analyst Abhishek Murali at Rystad, an energy consulting firm, said in comments quoted by the FT.

“I do not believe there is a structural reason why the lithium price is dropping in China,” Mathias Miedreich, CEO of Umicore, a Belgian firm making battery chemicals, told the FT.

“The Chinese lithium market was always a bit decoupled from the rest of the world” because China holds significant reserves that have been developed, he added.

As supply chains reshore, lithium prices will diverge more between China and the rest of the world, he predicted.

Albemarle, the world’s largest lithium supplier, has predicted China will sell 40 percent more EVs this year than last, about another three million.

“As China reopens, we expect moderation in EV demand to be short-lived, with medium- and long-term demand remaining robust,” Albemarle CEO Kent Masters said in a recent earnings call.

Even at current reduced prices, lithium remains eight times as costly as it was in 2020.

Lithium’s price dive lopped 10 percent off share prices for lithium mining and processing companies on 17 February. Stocks of Albemarle in the U.S. and SQM in Chile were hit.

Lithium-focused stocks dropped another 6.2 percent on 21 February.

The dip in share prices is unlikely to last, according to analysts at Scotiabank, because demand will continue to outstrip supply even as demand slips from “super growth” to “high growth.”

Africa is emerging as a center of lithium production, with miners in several countries already supplying China with cobalt, nickel, and other minerals.

However, bringing a new mine into production—even in Africa, where environmental and labor regulations can be lax at best and often nonexistent—still can take years.

“While the year ahead has a slight chance to see temporary softness in lithium spot prices, beyond 2024 we are stumped as to where supply will come from to satisfy demand,” they added.

TREND FORECAST: We agree. Lithium’s lower price will have little noticeable impact, if any, on EV sticker prices: automakers and battery companies will continue to need to pile up cash so they can keep paying stratospheric prices for lithium and other minerals for the next several years.

Of course this will change as new inventions replace the outmoded battery that was invented in 1800. Among them the move to hybrids which use a generator to energize the battery with gasoline when it is out of power.

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