Lithium Market Sees Production Cut and Cautious Recovery Outlook
In a recent update from the Australian Office of the Chief Economist (AOCE), the global lithium market is undergoing significant adjustments. After experiencing a drop in prices by 50% year-on-year, lithium producers worldwide have scaled back output and deferred expansion plans. This decision comes in response to a substantial decrease in lithium prices since 2023, primarily attributed to an oversupply and a slowdown in electric vehicle (EV) sales, notably affecting Chinese lithium carbonate miners.
The "Resources and Energy Quarterly" report by the AOCE anticipates a modest recovery in lithium prices in the upcoming years, with a forecasted increase to about $1,360 a tonne by 2026 before a predicted decline to approximately $1,090 by 2029. This recovery follows a challenging period marked by price reductions, with lithium carbonate prices falling to below 110,000 Chinese yuan ($15,202) per tonne.
Analysts, including Paul Graves, President and CEO of Arcadium Lithium, express caution, suggesting that the economic viability of lithium expansion projects remains uncertain at current market prices. This scenario could potentially lead to future supply shortages and price increases, although the timing and magnitude of such changes are difficult to predict due to the complexities of the global battery supply chain.
The AOCE highlights the impact of heightened lithium production in 2023, spurred by the high prices in 2022, which led to an increase in global supply. However, demand did not meet expectations due to slower EV adoption rates in the US and EU, leading to a market equilibrium that significantly reduced prices.
Despite the current downturn, long-term prospects for lithium remain optimistic, underscored by its critical role in decarbonisation efforts and the EV sector.
Growth in the European new energy vehicle industry is expected to decelerate in 2024, influenced by subsidy cuts and other factors. This slowdown, coupled with challenges in core markets like China and Europe, may temper global sales growth for new energy vehicles in 2024, with expectations for a market rebound not anticipated until 2025.
