Lithium is one of the most important raw materials of the so-called “green shift”, simply because it is essential for producing modern batteries.
They are not called lithium batteries for nothing.
The price skyrocketed in the summer of 2021, after concerns began to arise that supply would be far less than what the world’s battery makers needed.
In just a few months, the price went from less than CNY 100,000 per ton, to almost 500,000, before ending in November 2022 with a price of over 600,000.
China accounts for about three-quarters of the world’s battery production, and the price of lithium is normally quoted in Chinese currency.
Inflation has crushed demand for electric cars
But then inflation took hold. Demand for electric cars has begun to collapse on the global market. The price war launched by Tesla at the beginning of the year did not help demand. Major automakers have significantly reduced their investments in electric cars.
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– Electric car pessimism in China has limited demand for lithium for battery production during the period when supplies are normally replenished, Trading Economics reports, and says producers have instead used up excess inventories.
At the time of writing, the price of lithium has returned well below CNY 100,000, and is expected to fall to CNY 80,000 next year. This is much lower than the cost of production for many manufacturers.
– Lithium supply will increase further next year, which will likely push prices further down, reports Allan Ray Restoration on BloombergNEF.
According to Reuters, supply could increase by up to 40% next year, while global profits will increase by 4 to 12%.
– Harmful in the long term
This is good news for automakers, who should initially get away with much lower costs.
Forbes commentator Ariel Cohen believes that what is happening now could be harmful to the market in the long term:
– A certain degree of stability is needed to save the lithium market. Prices must be low enough to allow customers, such as battery manufacturers, to make a profit, but high enough to facilitate long-term investment.
– While this is a short-term boon for green industries that use lithium, the price collapse will be detrimental in the long term. Fear of another price decline, high capital costs and production that is not affected by the price decline may block the increase in lithium production for many years.
According to Trading Economics, a new lithium deficit is expected to occur in 2028.
Australia is one of the largest exporters of lithium. According to Australia’s ABC News, one of the country’s major manufacturers is considering shutting down part of its production. Core Lithium’s stock price fell as much as the price of lithium.
Cohen believes the time has come for green activists to confront market forces:
– This price collapse should remind everyone that green energy is just as influenced by market forces as its fossil fuel competitors. Market forces are here to stay. Environmentalists tend to ignore the market and focus on political or social goals. Let’s paraphrase Pericles: some environmentalists may not be interested in the market, but the market continues to be interested in them, he writes.
2023-12-28 18:39:06
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