The lithium market has experienced a dramatic price plunge since 2022. Its benchmark price in China has plummeted approximately 80 percent from its record high in November last year. This drastic decrease, alongside significant drops in nickel and cobalt prices, has driven battery costs to unprecedented lows, as reported by the media.
This price fall is attributed to a rapid development in lithium production, notably from lower-grade mines in China, which have unexpectedly revved up output. This surge in supply, coupled with softer demand due to economic uncertainties, rising borrowing costs, and inflation, has led to a market glut. As a result, industry experts, including those at Benchmark Mineral Intelligence, do not anticipate a return to a market deficit until 2028.
The world's leading lithium producer, Albemarle Corp., noted that prices have fallen to levels that challenge the viability of higher-cost projects. This situation might necessitate production cuts or slower expansion to stabilize the market.
Electric vehicle (EV) manufacturers are experiencing a mixed impact. While the lower lithium prices provide a financial reprieve, allowing for more aggressive battery production strategies, the overall demand for EVs has not escalated as expected. This mismatch has led to a saturated supply chain, with excessive batteries and material surpluses, further evidenced by the recent decline in nickel prices.
Investor sentiment reflects these market dynamics. The Global X Lithium & Battery Tech ETF, an exchange-traded fund tracking the lithium and battery technology sector, is at its lowest since November 2020. Similarly, the Sprott Lithium Miners ETF has been fluctuating near its all-time low since its inception in February.
For consumers, these market trends could translate into more affordable EV options. Manufacturers benefiting from reduced material costs might be better positioned to attract cost-conscious buyers, accelerating EV adoption.