Many investors are puzzled by the plunging lithium stock prices, especially considering the anticipated long-term demand. Let&#;s look into why this is the case and what is the market outlook for /25.
Link to Energyland
The current decline in lithium prices can be primarily attributed to the slowing growth of electric vehicle sales in China. This is coupled with the broader slowdown in the Chinese economy.
As demand remains sluggish at previous pricing levels and supply surpasses demand, prices have inevitably fallen.
Lithium carbonate prices have experienced a significant decline in China. They dropped from a record high of $81,360 per tonne in November to $20,782 per tonne in the current month. This marks the lowest level in two years, reflecting a 67% decrease year-on-year.
In response to the plummeting prices, Chinese refining companies are taking measures such as cutting production or suspending operations.
The sharp decline in lithium carbonate prices represents a nearly 75% correction. Market analysts attributed this to a series of negative catalysts that have suppressed lithium prices.
It&#;s essential to recognize that lithium stock prices have historically been volatile in the short term due to various factors.
Lithium is a specialized commodity produced in limited quantities, making supply disruptions a significant factor in price fluctuations. Moreover, changes in consumer trends, particularly in consumer electronics and EVs, can swiftly impact demand and supply.
The lithium market is also influenced by geopolitical conditions and regulations, which can alter demand dynamics. Also, advancements in technology have introduced new extraction techniques, affecting total supply and prices.
There is also potential for increased involvement from major oil and gas companies. This is evidenced by recent statements from CEOs of Exxon and Chevron expressing interest in the lithium industry.
Additionally, a large private energy company Lowry is advising is exploring investments in lithium assets to support the global energy transition.
Although China has historically dominated lithium supply from Australia, the rise of Western converters is expected to redirect more Australian supply to Europe and North America. This shift may challenge China&#;s market dominance as the Western supply chain expands.
Point in case is Canada positioning itself to contribute to meeting the North American lithium requirements. This is where a junior Canadian lithium company, Li-FT Power (LIFT: LIFFF), comes into play.
The company focuses on consolidating and advancing hard rock lithium pegmatite projects in Canada, especially in known lithium districts. Li-FT Power is committed to advancing the exploration and development of high-quality lithium assets in the country.
Strategic investments to secure future lithium supply are on the rise. Major automakers and lithium producers are already committing over $1 billion in alone.
For instance, GM invested $650 million in Lithium Americas, while Albemarle allocated $110 million to lithium developer Patriot Battery Metals. This trend is expected to continue as companies seek to safeguard their access to raw materials for batteries.
The EV market is still in its early stages, with significant room for growth. As EV penetration increases globally, demand for lithium will outstrip supply, especially as EVs become mainstream.
Since batteries constitute a significant portion of EV expenses, this presents an opportunity for EV manufacturers to either increase profits per vehicle sold or, more likely, reduce prices to remain competitive as rivals do the same. Lower prices tend to attract more buyers, leading to increased demand for lithium.
Consequently, as the current oversupply diminishes, the price of lithium is likely to rebound. This cycle of falling prices leading to increased demand, followed by a reduction in supply, underscores the cyclical nature of the lithium market.
Despite short-term volatility, the long-term forecast for lithium remains positive. Lithium is crucial for decarbonization efforts, especially in the EV sector.
The global demand can surpass 2.4 million metric tons of lithium carbonate by , doubling the forecast. BloombergNEF projects nearly a 5x increase in global lithium demand by the end of the decade, driven by rising battery demand for electric vehicles.
In the short-term, Goldman Sachs maintains a pessimistic outlook for lithium prices in . The brokerage firm projects further declines compared to current levels.
For more information, please visit Lithium Battery.
The broker anticipates this downward pressure in lithium prices this year due to oversupply.
Initially predicting a return to market deficit in , analysts now suggest a longer timeline, with the lithium market potentially bottoming out in . Thus, Goldman Sachs maintains a bearish view on the market, adjusting their 12-month targets downward for China Lithium Carbonate and CME Asia CIF Lithium Hydroxide.
Known for its accurate forecasts, Goldman Sachs estimates the following prices for :
Lithium carbonate: $13,377 per tonne
Lithium hydroxide: $14,263 per tonne
Spodumene 6%: $1,250 per tonne
As per S&P Global estimation, lithium prices will start to stabilize beginning in as surplus narrows down. From there, prices would start to rise up again as seen below.
Amid current market challenges, the commitment to global net zero emissions by is expected to drive continued demand for lithium. More notably, long-term prospects remain strong fueled by growing EV adoption and global decarbonization efforts.
Disclosure: Owners, members, directors and employees of carboncredits.com have/may have stock or option position in any of the companies mentioned: LIFFF
Carboncredits.com receives compensation for this publication and has a business relationship with any company whose stock(s) is/are mentioned in this article
Additional disclosure: This communication serves the sole purpose of adding value to the research process and is for information only. Please do your own due diligence. Every investment in securities mentioned in publications of carboncredits.com involve risks which could lead to a total loss of the invested capital.
Please read our Full RISKS and DISCLOSURE here.
In the past year, the global lithium market has been characterized by a significant shift in dynamics, with prices falling precipitously. Despite spot prices reaching over $80,000 per ton in December , they sit at just over $13,000 per ton as of Jan. 30, a decline of over 80%. Oversupply and softening demand leading to falling prices for the critical mineral raise concerns about the potential impact on various industries, particularly those reliant on lithium-ion batteries, such as electric vehicles (EVs), renewable energy storage, and consumer electronics. As a slump continues for the much-touted energy of the future, risks threaten to accumulate for U.S. businesses in the years ahead.
Lithium, a crucial component in the production of batteries, has been a key element of the advancement of clean energy technology. Along with other critical minerals, including nickel, cobalt, manganese, and graphite, the metal is an essential component in many of today&#;s clean energy technologies, such as EVs, electricity networks, and wind turbines. In addition, lithium batteries are used in many everyday electronics, from phones, laptops, and tablets to power banks, though at a much smaller level. Over the years, growing government and private sector initiatives to wean dependence off fossil fuels in favor of renewable energy solutions initially led to a spike in lithium prices, creating a robust market for the mineral.
However, several key factors have triggered a shift in the landscape. As Citibank termed it, a &#;perfect storm&#; has hit the lithium market, caused by destocking, deceleration in EV demand, and continued supply growth. The sudden deceleration in demand for lithium, particularly in the EV industry, caught suppliers by surprise, and as their stockpiles increased, this surplus placed downward pressure on prices. Much of the fallout has been compounded by large-scale anticipation and investment in the EV industry, as high lithium prices made projects previously deemed economically unviable suddenly profitable and able to deliver products online much quicker than anticipated. Yet economic uncertainty in the past year propelling consumers to grow more cautious about their expenditures has resulted in disappointing returns. This is especially true as China, the world&#;s largest EV market, is experiencing a sluggish resurgence in domestic consumer spending following the abandonment of its COVID-19 containment policy in late . Seasonal weakness presents further anticipated declines as China&#;s Lunar New Year approaches this month, which historically sees lower demand for lithium products.
On the surface, commodity price fluctuations and over-investment in production are hardly unusual. However, what differentiates lithium and makes the situation potentially volatile is the intense geopolitical competition brewing over the mineral, the complex regulatory environment, the lack of a formal lithium commodity market and uncertainties in the timeline of energy transition linked to mitigating climate change. China dominates the lithium-ion battery industry, with Chinese companies supplying 80% of battery cells worldwide, leaving U.S. companies exposed to supply chain vulnerabilities. Persistently low prices could synchronize with China&#;s large-scale manufacturing capabilities, enabling the country to continue subsidizing production in times of low demand, dumping products at below-market prices onto the global market, and restricting access to lithium-ion batteries to certain countries or companies as it sees fit. Despite this, regulatory solutions have been slow to catch up. President Joe Biden&#;s Inflation Reduction Act offers a full tax credit of $7,500 for purchases of EVs that contain a certain percentage of the value of the battery component that does not originate in China and is produced and manufactured in North America, set to take effect this year. However, critical mineral mining, refining, and battery production cannot be developed in this time frame while adhering to environmental and safety standards to which U.S. and European companies are bound. As a result, most EVs today in the U.S. would not qualify, disincentivizing consumers.
In addition, the potential of lithium to provide a lasting solution for reducing dependence on fossil fuels and combatting climate change becomes more limited as price volatility continues. Though in the near term, while lower prices benefit consumers who were previously unable to purchase lithium-based technologies, including some green energy industries, suppliers will find it less profitable to invest in long-term efforts to increase production, leading to further market misalignments down the line. Furthermore, current lithium mining techniques present their own slew of environmental concerns, including water contamination and landscape degradation. With costs mounting and returns appearing weak, Western companies involved in the extraction process may find it cumbersome to abide by environmental guidelines while maintaining profitability.
Although lithium prices remain in free fall for the time-being, the energy transition away from fossil fuels and present lack of suitable alternatives suggest that demand for lithium-powered energy sources will continue rising over the next decade as governments attempt to meet clean energy goals. According to a study by McKinsey, global demand for lithium-ion batteries is predicted to grow from around 700 gigawatt hours (GWh) in to 4,700 GWh in , propelled primarily by mobility applications (such as EVs), followed by stationary storage, and lastly, consumer electronics. The report predicts demand growth to be highest globally in the U.S. and EU, though a substantial number of new battery factories will need to be built over the decade, necessitating market cooperation from firms.
S&P Global projects that lithium carbonate prices will stabilize near current levels in a range between $20,000/mt and $25,000/mt from to . Stability is key to attracting investment, with prices reaching a sweet spot to be low enough so that consumers (i.e., battery manufacturers) can turn a profit, but high enough to entice suppliers towards continued expansion.
U.S. businesses currently face pricing disincentives for investment in lithium as a commodity, as present market conditions dictate less room for profitability in the face of fluctuating consumer demand. Nonetheless, opting out of the race for this critical mineral proves risky as well, provided that a clean energy transition is inevitable in the years to come. Producers that decide to move away from lithium, as well as those who get priced out in the current market scenario, may find themselves at the mercy of a future energy industry dominated by the critical mineral. Technology plays a variable factor, with recent reports suggesting that artificial intelligence can improve profitability and feasibility for extraction efforts, as well as improve efficiency by reducing the amount of lithium needed for batteries. But beyond these uncertainties, it remains likely that lithium demand will be buoyed as energy transition gains momentum globally, and as the market matures, pricing mechanisms, such as a futures market, will emerge to better manage the cyclical market conditions.
If you are looking for more details, kindly visit 20KW Off Grid Inverter.