Despite an 80% drop in 2023, lithium prices are projected to fall further this year. The Australian Office of the Chief Economist (AOCE) in its Resources and Energy Quarterly forecasts a decline in lithium prices due to surplus production.
The spot price of spodumene is forecasted to fall to $2,200 in 2025, while lithium hydroxide is expected to average around $30,000 per tonne. Presently, lithium carbonate prices are at a three-year low of 95,500 Chinese yuan per tonne ($13,446).
The decline in lithium prices is partly attributed to slack demand from battery manufacturers and a reduction in EV sales in China. Global sales of fully electric and plug-in hybrid vehicles increased by 31% in 2023, significantly lower than the 60% growth in 2022.
Production Adjustments and Supply Growth
The high prices in 2021 and 2022 led to increased investment in lithium production, resulting in a surplus. High-cost producers have cut output due to unprofitability. Australia’s Greenbushes lithium mine, the world’s largest, has reported stockpiling surplus production.
Market research firm UBS anticipates the next lithium deficit to return only in 2028. The global carbonate equivalent supply is expected to rise by 40% in 2024, deepening the current surplus.
The AOCE acknowledges a high degree of uncertainty in price forecasts due to structural market changes and rapid EV demand growth. However, the lithium market is forecasted to reach $32.2 billion by 2031, driven by the adoption of electric vehicles and renewable energy sources.
The demand for lithium is expected to increase, supported by government policies promoting renewable energy and electric vehicles. Advancements in lithium-ion batteries and exploration of alternative chemistries are likely to shape the future of the lithium market.
Aluminum Castings Market Growth
In related news, the global aluminum castings market is expected to grow at a CAGR of 5.4% from 2023 to 2031, reaching $119.3 billion by the end of 2031.