Fitch Solutions’ business intelligence unit, BMI analysts, wrote in an article on Thursday that the lithium market has entered a new normal of price stability, with the days of continuous price increases becoming a thing of the past.
BMI’s Head of Commodities Analysis, Sabrin Chowdhury, pointed out that the stabilization of lithium prices is primarily due to the rapid expansion of global supply, leading to a market surplus, and it is expected that lithium prices will struggle to return to previous highs in the coming years. Prices are projected to remain below the peaks of 2022 and 2023 for at least the next five to ten years.
For this year, BMI predicts that the average price of domestically produced 99.5% battery-grade lithium carbonate in China will be $15,500 per ton, which is expected to rise to to $20,000 per tonne by 2025, significantly lower than the average of $72,000 per tonne in 2022.
Analysts believe that this outlook is reshaping the landscape of the lithium industry, providing opportunities and challenges for major producers and junior developers. The prolonged period of low lithium prices may drive cost-saving methods and industry mergers and acquisitions. Junior producers and developers may need to introduce new technologies, such as direct lithium extraction for brine projects, creating an ideal environment for mergers and acquisitions where larger, well-funded miners will seek to acquire promising lithium assets to meet growing demand.
Driven mainly by the electric vehicle (EV) industry, lithium demand is expected to continue robust growth. Analysts project that global demand for lithium in the EV sector will increase by approximately 14% in 2024 and 2025. In 2024, global passenger EV sales are forecasted to reach 17.6 million units, reflecting a 21.3% year-on-year growth.
Senior metals and mining analyst Olga Savina stated that global lithium production is expected to grow by 16.4% in 2024 to 1.12 million tonnes of lithium carbonate equivalent (LCE) and by 19.7% in 2025 to 1.35 million tonnes of LCE. By 2028, global lithium mine production and demand are projected to reach a balance of about 1.9 million tonnes, with demand surpassing supply thereafter.
Analysts believe that despite the price decline, many major producers remain profitable, mainly due to their ability to maintain low production costs. The future growth of the lithium market will depend primarily on a few countries such as Australia and China. Australia, already a leading hard-rock lithium producer, is expected to continue dominating due to its strong project pipeline. China will continue to import lithium for its battery industry while expanding domestic production capacity and securing supplies through overseas projects.
Influenced by tense geopolitical relations, governments of multiple countries are aiming to onshore mineral production and processing capacity, enhance recycling capabilities, establish strategic partnerships, and diversify supply chains as key strategies. These measures seek to reduce external risks and ensure a stable supply of lithium for the green energy transition.
