Lithium industry analysts expecting a recovery from a severe downturn have been disappointed by recent price declines, signaling continued challenges in the electric vehicle (EV) supply chain.
Spot prices for lithium carbonate in China have dropped to their lowest levels since August 2021, with futures on the Guangzhou exchange down 12% this month alone.
Albemarle, a leading producer, saw bids at its latest auction decrease by 6.9% from previous sales earlier in June.
These declines follow an 80% plunge in 2023 due to oversupply and slowing demand growth. Although prices stabilized earlier this year, inventories remain high as customers delay purchases amid uncertain market conditions. .
This bearish sentiment has also impacted stock prices of producers like Albemarle and Piedmont Lithium Inc.
Increased lithium production and expectations of reduced demand during the summer months are contributing to the downward pressure on prices, according to Susan Zou from Rystad Energy.
Despite a brief uptick earlier this year, driven by reduced supply around China’s Lunar New Year and speculative trading, supporting factors have largely faded.
While some traders anticipate limited downside, citing current low contract prices in Guangzhou for July, others note rising inventories.
Citigroup reports a significant increase in lithium carbonate stocks held by downstream players, including a notable rise among cathode makers and battery manufacturers.
Investor sentiment towards lithium producers has also soured, exacerbated by scaled-back EV ambitions from major automakers like Ford, General Motors, and Tesla.
Shares of Albemarle have plummeted 23% this month, reflecting a year-to-date loss of 34%. Lithium Americas and Piedmont Lithium Inc. have similarly faced substantial declines in 2024.
Despite these challenges, there is ongoing activity in the lithium sector. Equinor ASA recently announced a stake acquisition in lithium projects in Arkansas and Texas, while Occidental Petroleum Corp. formed a joint venture to commercialize lithium extraction technology in California.
While the near-term outlook remains uncertain, long-term investments in lithium extraction technologies and expectations for robust future demand underscore continued interest and strategic positioning in the sector.
