Lithium prices continue to be under pressure in 2024 as the industry adapts to changing supply and demand dynamics, Wood Mackenzie, a U.K.-based global research and consulting group, said in a report on Wednesday (31 January). Some lithium miners have been forced to cut production and seek cost-cutting measures, including layoffs, as prices continue to plummet and demand slows.
While lithium remains an important raw material for batteries, demand growth for lithium is slowing as a result of a maturing market, sluggish electric vehicle (EV) sales, and a decline in the intensity of use of evolving cathode chemistries, the report said.
Allan Pedersen, chief lithium analyst at Wood Mackenzie, said global sales of plug-in electric vehicles are expected to grow by 33 per cent this year, a sharp decline from the 71 per cent average annual growth rate between 2021 and 2023. Reduced government incentives and inadequate charging infrastructure are expected to dampen EV sales this year, and this market shift will have an impact on lithium demand.
In 2023, the lithium market experienced price declines under pressure from oversupply. Looking ahead to 2024, Wood Mackenzie expects the de-stocking trend to continue, further impacting lithium industry dynamics.
Demand in the lithium market has nearly tripled over the past three years to reach approximately one million tonnes by 2023, but the growth rate is expected to slow, Pedersen said. Nonetheless, the industry’s fundamentals remain sound, driven by the global decarbonization process.
Analysts expect a notable feature of the lithium sector this year to be the inability of companies with a single asset to halt production without jeopardizing cash flow, leading producers to explore alternatives such as improving grades or reducing spending. In contrast, lithium giants with multiple assets, such as Albemarle, Tianqi and Ganfeng, have been able to restore balance to the market and maximize long-term asset values by reducing production.
Analysts believe that M&A deals in the lithium sector are likely to increase this year as lithium giants look for growth opportunities and top mining companies consider entering the market.
