Two years were enough to blur the bing bang lithiumas reduced demand for electric car batteries turned the boom into a general recession.
The big question now is what comes next in a global market in which billions of dollars have been invested.
The price of lithium hydroxide futures on the Chicago Board of Trade has plummeted and is now at $11,930 a tonne, down from $85,000 dollars which was the historical record of 2022.
Those who like to see the glass half full remember that the same game with lithium was played in the past.
In 2016-2017 there was a similar boom-bust cyclebut the truth is that this time no one seems to be waiting
quick recovery.
The short-term outlook points to continued low prices, as well as the market is trying to absorb the excess lithium.
The longer-term horizon, market experts told Reuters, may be more favorable as governments are now forced to implement mass electrification programs. But according to BMI, a subsidiary of Fitch Solutions, a return of prices to record highs in 2022 has not been expected for at least a decade.
Complex data
The data is complex and accurate predictions seem very difficult. When it comes to supply, lithium producers see their product as a specialty chemical tailored to the exacting specifications of battery manufacturers, rather than a generic product.
However, the price behavior of lithium is that of any other commodity. There are periods of high prices that encourage overproduction, which must then be eliminated by periods of low prices.
This pattern is now playing out, with producers reducing output and postponing investment programs in response to the new reality of low prices.
A little-discussed element of the current boom, however, is the rise of artisanal mining (ASM) in Africa, particularly in Nigeria.
and Zimbabwe.
Research house CRU estimates that artisanal miners gave nearly two-thirds of Africa’s lithium supply in 2023, with volumes almost equivalent to last year’s global market surplus.
Furthermore, African shipments of low-grade ores and concentrates accounted for a quarter of China’s total lithium imports in the first quarter of this year.
However, ASM is highly price sensitive.
The current wave of independent production began when the price of spodumene ore was above $6,000 per tonne in early 2023. It is now closer to $1,000, putting at risk any production beyond that from the richest deposits.
In general, artisanal mining can be an important supply driver, but it is also extremely volatile – a fact
which can lead to a total change of data in the market.
The shift to hybrids
Ahead of demand the big drop in the price of lithium came through the lowering of electricity sales expectations
vehicles worldwide.
There are recent signs of recovery, but the trend is far from being reversed. BNP Paribas, for example, still expects global sales of electric vehicles to grow 23% this year, equivalent to more than 18.7 million vehicles. What has changed, however, is the product mix.
Sales of pure battery vehicles are stagnant, while sales of gas-electric hybrids are rising, even in China.
Chinese sales of plug-in hybrids saw a 90% year-on-year increase in April and May, while sales of all-electric vehicles
increased by just 10%, according to BNP