After experiencing a sharp rise in 2022, lithium prices plummeted last year. The primary reasons for this decline in the battery metal were the slowdown in electric vehicle (EV) sales growth, especially in China, and the accelerated launch of new production capacity, leading to a market oversupply. According to data from the United States Geological Survey (USGS), global lithium production increased to 180,000 tons last year. Meanwhile, global EV sales in 2023 grew by 31%, but fell short of expectations.
Benchmark Mineral Intelligence data shows that on January 11, 2023, the average global lithium carbonate price was $70,957 per ton, which had dropped by 50% to $35,333 by May 3. Although there was a slight rebound in prices in May, maintaining above $40,000, prices began to fall again in August. By December 13, the lithium carbonate price had dropped to $17,265.
The effects of the long-term low lithium prices undoubtedly transmitted to the supply side, with many projects experiencing slowdowns and delays in construction, and some planned projects facing greater difficulties in financing. Faced with the new market environment, some lithium miners have cut production guidance or delayed expansion plans. Fastmarkets projected at the end of January that global lithium supply in 2024 would increase by 30%. However, if more companies reduce production, the actual growth rate may be lower. It is expected that the lithium market will remain in an oversupplied but manageable state in 2024.
In terms of new production capacity, Africa is a significant focus. According to Research and Markets’ forecast, by 2030, Africa’s share of global lithium production will be close to 25%, with one country, Zimbabwe, contributing approximately 40%. In North America, several high-grade projects in Canada, such as the Corvette project in Quebec by Patriot Battery Metals Inc (TSXV: PMET, OTCQX: PMETF), will provide production for the Western countries’ supply chains.
Regarding the outlook for lithium prices, experts anticipate relative stability in the 2024 market. Fastmarkets predicts that the average price of lithium will remain near current levels. CRU anticipates the price of lithium carbonate to be between $10,000 and $15,000 per ton, with lithium hydroxide at a discount of $500 to $1,000. In addition, Benchmark also believes that the lithium market will be in a relatively balanced state in 2024.
The 2024 lithium market will be primarily driven by EV demand, so the market outlook heavily depends on EV sentiment and sales. As China, the United States, and the European Union all seek to protect domestic markets and expand domestic supply chains, their policies and actions over the next year will also have a significant impact on the lithium market.
