Lithium’s Price Volatility Challenges Electric Vehicle Boom
The journey of lithium, often dubbed "white gold" due to its crucial role in the ecological transition, has been anything but stable. After peaking at over $86,000 per ton in November 2022, lithium prices plummeted to around $13,000, marking an 85% drop. This significant decline comes at a time when lithium's demand is projected to surge, primarily driven by the electric vehicle (EV) sector, which is expected to account for 90% of its usage by 2030.
The fluctuating prices of lithium stem from the spot market's nature, where supply-demand dynamics at any given moment dictate the costs. According to Benjamin Louvet, a commodities specialist, the swift adjustment of supply by lithium producers hasn't been matched by the expansion of the electric car range by manufacturers. While launching a mining operation typically spans 17 years, lithium extraction from salt deserts can be accomplished in four to six years. However, the global slowdown in the EV market, including in China, has contributed to an oversupply, with Mackenzie reporting a surplus of over 200 GWh of lithium-ion batteries in China alone last year.
The dilemma now is how to recalibrate the market. Lower lithium prices could theoretically reduce battery costs, potentially making EVs more affordable. Yet, the current low prices have compelled producers to defer development projects or even shut down mines, actions deemed "unsustainable" by Kent Masters, CEO of Albemarle, the leading lithium producer. This paradox raises concerns about future lithium availability as the world gears up for a substantial increase in demand.
Despite the market's current depression, not everyone is deterred. In the US, startups like Lilac Solutions are pioneering projects to harness lithium from sources like the Great Salt Lake in Utah. These initiatives, supported by the Biden administration's investment in the battery industry, aim to reduce dependence on China and boost "made in America" mineral production. Similarly, in France, the government backs the Lithium de France project for sovereignty reasons, aligning with the European Critical Raw Material Act's mandate for local production of essential minerals.
As the industry grapples with the boom-and-bust cycle of raw materials, the need for a balanced approach to lithium production and consumption becomes ever more critical. The lithium market's future stability remains uncertain, with experts like Benjamin Louvet not anticipating normalization before 2025 at the earliest. Amid these challenges, innovative projects and government support highlight the ongoing efforts to secure a sustainable and sovereign supply of lithium, essential for the global transition to green energy and EV adoption.
