Lithium Prices Soaring to the Sky... Plunge 30% in 3 Months

[Asia Economy Reporter Yujin Cho] The soaring price of Chinese lithium has turned downward. The price of Chinese lithium, which surged sharply over the past two years, has fallen by 30% in the last three months. There are also forecasts that the decline in lithium prices will accelerate further due to the global economic downturn and increased supply.

According to UK market research firm Fastmarkets on the 22nd (local time), the price of Chinese lithium carbonate has continued to decline for six consecutive trading days, reaching 425,000 yuan per ton. This is a 29% drop over the past three months compared to the historic peak of 598,687 yuan in November last year. Lithium, known as "white petroleum" as a key material for electric vehicle batteries and a strategic resource, saw its price skyrocket over the past two years due to the explosive demand driven by the expansion of the electric vehicle market. During this period, the price increase rate exceeded 1000%.

Following the weakness in Chinese lithium prices, the stock price of Albemarle, the world's largest lithium producer based in the United States, has plummeted more than 14% since the 16th, and the stock price of Chilean lithium processor SQM also fell 15% during the same period.

The decline in Chinese lithium prices is attributed to the slowdown in electric vehicle demand following the end of subsidies in China. In January, the first month after the Chinese government ended electric vehicle purchase subsidies, sales of electric vehicles and plug-in hybrid vehicles in China totaled 408,000 units, a 6.3% decrease compared to the previous month.

Accordingly, as domestic electric vehicle demand in China decreases, there is growing support for the view that the supply and demand in the lithium market this year will not face as many disruptions as before. The end of government subsidies in China, the largest consumer of electric vehicles, combined with the expansion competition among major lithium producers, has raised concerns about oversupply, which is driving lithium prices down.

Although the recent price decline has returned some of the previous gains, prices remain nearly eight times higher than two years ago. China’s CATL, the world’s largest battery manufacturer, last week significantly lowered lithium prices to 200,000 yuan under the condition that electric vehicle manufacturers purchase 80% of the demand during the process of signing supply contracts with domestic electric vehicle manufacturers. Abhishek Munali, an electric vehicle analyst at global energy consulting firm Rystad, said, "The ultra-fast growth of the electric vehicle market seen in 2021 and 2022 is unlikely to be observed this year."

[Image source=AFP Yonhap News]

However, there are also optimistic forecasts that the recent price weakness will not lead to a sustained downward trend. Albemarle maintained an optimistic outlook on electric vehicle sales and lithium prices, stating that China’s electric vehicle demand will increase by 40% compared to the previous year. This is based on the judgment that demand growth still outpaces supply growth, supporting prices at a high level. Kent Masters, CEO of Albemarle, said, "With China’s reopening (economic resumption), mid- to long-term demand is expected to remain strong, and the slowdown in electric vehicle demand is expected to be temporary."

This content was produced with the assistance of AI translation services.