The World’s Largest Producer: Low Lithium Prices Are Unsustainable

Outlook for the Lithium Market in 2024
Published on: Feb 21, 2024

Albemarle Corp (NYSE:ALB), the world’s largest lithium producer, recently expressed concerns over the unsustainable low lithium prices and highlighted the necessity for an increase in lithium prices to stimulate supply investments for long-term demand growth. The lithium market has shifted from scarcity to surplus with the production of new mines and a slowdown in electric vehicle sales, leading to a more than 80% drop in lithium prices from the historic highs reached at the end of 2022.

For example, the price of lithium carbonate in China plummeted from a high of $81,360 per ton in November 2022 to $20,782 per ton this month, marking a two-year low and a 67% year-on-year decline.

Lithium has wide-ranging industrial applications, including lithium-ion batteries, ceramics, glass, lubricants, refrigerants, nuclear energy, and the photovoltaic industry. Additionally, lithium-ion batteries are a crucial aspect of its application, widely used in devices such as mobile phones, digital cameras, and electric vehicles.

Albemarle’s CEO, Kent Masters, noted that the decline in lithium prices means that some projects and mines will operate at a loss, and new greenfield projects, particularly those in Western countries, are no longer economically viable for development. Consequently, lithium suppliers worldwide are controlling expenses and even reducing production, such as Core Lithium in Australia suspending mining activities and the Greenbushes lithium mine reducing production.

These supply reductions are expected to contribute to restoring a balance in the lithium market’s supply and demand.

Lithium prices are highly volatile and influenced by multiple complex factors such as supply and demand fluctuations, geopolitical issues, and macroeconomic conditions. Furthermore, the industry is still in its early stages of development, lacking transparency, which adds to the uncertainty and volatility of the lithium market.

Despite the current low lithium prices, the thriving lithium-ion battery manufacturing industry is expected to provide long-term support for this metal.

Lithium-ion batteries are widely used in the electric vehicle and energy storage system industries, and with the continued growth of the new energy industry, the proportion of lithium in total energy demand is expected to continue increasing. Global demand for lithium carbonate is projected to exceed 2.4 million tons by 2030, double the expected value for 2025. Additionally, BloombergNEF forecasts that global lithium demand will almost quintuple by 2030, primarily driven by the sustained growth in electric vehicle battery demand.

Albemarle is poised to embrace and benefit from this long-term growth trend, as evidenced by the supply agreement it signed with BMW, which will take effect in 2025. According to the company’s forecast, electric vehicle demand is expected to grow by over 30% this year, with current lithium supply and demand relatively balanced. The company anticipates sales growth of 10%-20% this year, lower than the approximately 35% growth last year. However, with the transformation of the electric vehicle industry, lithium demand is expected to increase 2.5 times by 2030.

Clean Energy Electric Cars Energy Metals Lithium