Introduction

In recent times, the global market has witnessed a notable decline in lithium prices, a phenomenon that has raised eyebrows within the energy and technology sectors. The prices have witnessed an unexpected descent in 2024 which has left industry experts and investors searching for answers in a landscape shaped by a multitude of factors.

As we delve further with this topic, it can be said that it has become apparent that the world of lithium is undergoing a shift and lithium is now facing a complex interplay of forces driving its prices downward.

This post will unravel the reasons behind the decline in lithium prices and the current state of the lithium market.

They include:

1) Increased Lithium Supply: One of the primary drivers of falling lithium prices is the substantial increase in global lithium supply outpacing demand growth. As demand for electric vehicles and renewable energy storage systems continues to grow, lithium mining operations have expanded, resulting in an oversupply of the metal.

Major lithium-producing regions like Australia, Latin America and China are ramping up production, leading to an oversupply situation.

The decrease in lithium prices is linked to an oversupply situation in Asian markets, mainly due to a noticeable slowdown in the global adoption of electric vehicles, driven by elevated interest rates.

Using China as a reference, The price of battery-grade lithium carbonate in China has experienced a substantial drop starting from November of 2022, plummeting from $81,360 per tonne per metric ton to $20,782. This is lowest point in two years as it is showing a 67% decrease year-on-year.

2) Advancements in Extraction Technologies: Over the past few years, there has been a remarkable leap forward in lithium extraction technologies. Traditionally, lithium was obtained through labor-intensive methods, but the industry has evolved. Newer, more efficient technologies have streamlined the extraction process, significantly reducing production costs. This efficiency gain has flooded the market with more lithium, adding to the overall oversupply and putting downward pressure on prices.

3) Diversification of Lithium Sources: Global demand for lithium has driven exploration beyond traditional sources. Mining operations are tapping into previously overlooked reservoirs such as geothermal and oilfield brines. This diversification in sourcing has not only expanded the availability of lithium but has also altered the market dynamics. As more sources come online, the market witnesses increased competition, leading to a drop in prices.

4) Decline in Electric Vehicle Demand: The decline in lithium demand growth due to an economic slowdown affecting Electric Vehicle demand is a result of reduced consumer spending power and overall economic uncertainty. When economies slow down, consumers tend to be more cautious with their purchases, including high value items like electric vehicles. This cautious approach leads to a decrease in the demand for Electric Vehicles, which in turn affects the demand for lithium, a key component in Electric Vehicles batteries. As the demand for Electric Vehicles decreases, so does the demand for lithium, causing a ripple effect throughout the supply chain and ultimately leading to a decline in lithium prices.

5) Advancements in Battery Chemistry Technologies: The battery landscape is experiencing a revolution. Innovations in battery chemistry are paving the way for alternatives that use less or no lithium. This paradigm shift in technology, driven by the quest for higher energy density and longer battery life, is affecting the demand for traditional lithium-ion batteries. As newer, more efficient batteries hit the market, the demand for traditional lithium-ion batteries decreases, contributing to the overall decline in lithium prices.

6) Economic and Geopolitical Factors: Economic conditions and geopolitical events always play a significant role in commodity markets. Fluctuations in global economic health and trade policies can impact investor confidence and, subsequently, the demand for commodities like lithium. Additionally, geopolitical tensions can disrupt the supply chain, influencing market dynamics. These external factors add an element of uncertainty, contributing to the current decline in lithium prices.

7) Recycling Initiatives: The push for environmental sustainability has brought battery recycling to the forefront. As recycling technologies become more advanced and economically viable, the reliance on freshly mined lithium diminishes. The recycling of lithium-ion batteries contributes to a more sustainable supply chain and directly affects the demand for newly extracted lithium. This shift towards recycling is a positive step for the environment but simultaneously exerts downward pressure on lithium prices as the market adjusts to this more circular approach.

Impact of Lithium Prices on Electric Vehicles

The Electric Vehicle (EV) market is still in its infancy, poised for substantial expansion. With the ongoing global rise in Electric Vehicle adoption, the demand for lithium is expected to surpass its current supply, particularly as electric vehicles transition from niche to mainstream. As batteries constitute a significant chunk of Electric Vehicle costs, this situation offers an opportunity for Electric Vehicle manufacturers. They can either enhance profits per vehicle sold or, more probably, opt to reduce prices to maintain competitiveness in a market where rivals are doing the same. Lower prices generally attract a broader customer base, leading to an upsurge in lithium demand.

As the oversupply decreases, lithium prices are expected to bounce back. This repetitive pattern, influenced by fluctuations in demand and supply, is a key characteristic of the lithium market, especially as the electric vehicle industry evolves.

What can we expect in the future of Lithium

Despite some ups and downs in the short term, the future looks good for lithium. It’s essential for reducing carbon emissions, especially in electric vehicles. Experts predict a significant increase in global demand for lithium, more than doubling the 2025 forecast by reaching over 2.4 million metric tons by 2030. However, there’s a temporary pessimistic outlook for lithium prices in 2024, with Goldman Sachs expecting a drop due to oversupply.

Goldman Sachs, a recognized global investment banking company known for accurate predictions, forecasts lower prices for lithium in 2024, but they see a potential market bottom in 2025. They’ve adjusted their targets downward for China Lithium Carbonate and CME Asia CIF Lithium Hydroxide. Despite these challenges, the push for global net zero emissions by 2050 is likely to sustain the demand for lithium. Long-term prospects remain strong, supported by increasing electric vehicle adoption and global efforts for decarbonization.

Conclusion

As we can see in this new evolving landscape of the lithium market in 2024, it is evident that the interplay between supply dynamics and demand trends is reshaping how prices are structured. Also, economic and global issues are playing a part in how the prices fluctuate.

However, while lower lithium prices present challenges for some stakeholders, they also offer opportunities for electric vehicles and energy storage companies to capitalize on cost advantages.

In summary, people involved in energy and technology should know how important it is to grasp these factors to navigate the changing lithium market and act in accordance so it will not affect their companies negatively.

As they understand these price fluctuations, it will help these stakeholders and policymakers adapt to a changing environment which is driven by evolving supply-demand dynamics in the lithium sector as it is crucial for their business.

At Dellahs Mining, we actively leverage our insights into lithium price fluctuations to drive strategic decision-making. By staying informed of market trends, we optimize our mining operations and resource allocation, ensuring resilience in the face of changing dynamics. Furthermore, we are committed to collaborating with stakeholders and policymakers, sharing our knowledge to contribute to informed decision-making within the industry.

Our company’s proactive approach involves continuous research and innovation, allowing us to adapt swiftly to evolving market conditions. By embracing flexibility and sustainability, we position ourselves not only as a key player in the lithium market but also as a partner in shaping its future.

Also see Unlocking Nigeria’s Lithium Potential with Dellahs Mining