Lithium prices remained subdued at the beginning of 2024, still well below highs set in late 2022 and 2023. Several factors, including oversupply and weak electric vehicle (EV) demand, united to keep prices muted over the 90 day period.
Despite a market glut keeping prices down, Fastmarkets is forecasting that lithium supply will increase by 30 percent by year’s end. However, lithium analysts did note that the current price environment could disrupt this fresh supply, as some producers may choose to reduce production or delay expansions.
Production cuts could be a signal that the market has “bottomed,” resulting in some rebalancing later in the year.
“Indications were that inventory was quite strong both at the finished cell level and upstream with miners/brine producers,” Adam Megginson, price and data analyst at Benchmark Mineral Intelligence, told the Investing News Network (INN) via email. “As such, procurement activity on the spot market was fairly subdued. Buyers in Japan and South Korea opted to draw from inventory or volumes already being procured under contract rather than procure additional on the spot market.”
Trading activity was also muted in January as market participants anticipated the Spring Festival.
“Expectations were that demand and in turn prices would pick up afterwards,” explained Megginson. “This restocking activity didn’t immediately materialize after the Spring Festival, which led to some gloomier sentiment in China.”
“The long-term outlook for the industry remains incredibly exciting. Both Ganfeng and Pilbara Minerals remain focused on extending our respective positions as major, low-cost producers in the burgeoning lithium market,” said Dale Henderson, Pilbara Minerals’ managing director and CEO, in the announcement.
As downstream players sought deals amid low prices, producers began revising production tallies.
“We also began to see some supply response to the persistent lower price environment, with the announcement of delays to expansion plans and layoffs at some lithium producers or aspirants,” Megginson said. “I only expect this to palpably impact the supply picture in 12 to 18 months from now, as that is when these expansions were planned to ramp.”
“The recent material decline in spodumene prices has triggered significant reductions in short and medium-term lithium price forecasts,” it reads. “As a result, we have commenced a review of the planned expansion and associated ramp-up of Kathleen Valley to preserve capital and reduce the near-term funding requirements of the project.”
While the company reviewed potential ways to cut overall costs, it did note that there will be any changes to its plant capacity design, which has a planned capacity of 3 million MT per year and is currently under construction.
The beginning of March brought on some recovery in lithium prices as both carbonate and hydroxide made gains.
After starting the month at US$14,977.15 per MT, lithium carbonate registered a five month high of US$16,109.48 on March 14. Prices for lithium hydroxide also moved northward on the London Metal Exchange, hitting a Q1 high of US$13,425 per MT on March 11.
For Megginson, the move was in line with the forecasted balancing analysts expect to see in the 2024 lithium market.
“We forecast a fairly balanced market in 2024,” the Benchmark price and data analyst said. “While the low price environment has caused some project expansions to be pushed back slightly and some of the marginal, higher cost supply has come offline — this has been mostly counterbalanced with larger producers producing more.”
He went on to outline the factors that likely brought on the momentary price rally.
“On the demand side, cathode producers in China announced that they would substantially increase production in March, some by as much as 30 percent month-over-month — albeit compared to a very low level in February as Spring Festival was taking place,” Megginson said.
The drivers on the supply side were a little more nuanced.
“Environmental inspections at lepidolite producers in Jiangxi province led to some concerns about supply from the region,” Megginson explained. “Transgressions were found in terms of the handling of lithium slag and some participants thought that supply could become constricted. In the end the impact of these inspections was relatively limited with two companies being told to take action, with the remainder recommencing normal production (as of April 5).”
Megginson went on to note that there are now “rumblings” that brine producers in the same region could undergo similar environmental inspections.
“Although downstream demand is ticking up notably at the moment, ample supply overall is likely to limit the extent of price rises in the short term,” he concluded.
The loan is earmarked for financing the construction of the processing facilities at Thacker Pass, which Lithium Americas states has the largest known measured and indicated lithium resource in North America.
The strategic investment is designed to further strengthen the North American battery metals supply chain.
“The United States has an incredible opportunity to lead the next chapter of global electrification in a way that both strengthens our battery supply chains and ensures that the economic benefits are directed toward American workers, companies and communities,” Jonathan Evans, president and CEO of Lithium Americas, stated.
Towards the end of Q1 there was more significant news for the lithium market.
Chile also announced that it had opened up over two dozen salt flats in the country for private investment.
The new lithium policy aims to promote sustainable development while ensuring fair participation among industry stakeholders. Chile intends to streamline the permitting process for lithium projects, encouraging greater investment and boosting production. Additionally, the government plans to establish a lithium consortium to oversee research and development initiatives, facilitating technological advancements in lithium extraction and processing.
Megginson advises watching output from Africa.
“Although the quality of material is more variable than comparable material from for example Australia, and the continent still makes up a small proportion of overall global supply, supply of hard rock lithium concentrates from Africa is growing rapidly, especially from Zimbabwe and Namibia,” he said. “Currently, Chinese converters are responsible for the majority of the projects that are at more advanced stages. It is worth noting that many of these projects are not economical when lithium chemicals prices are significantly below RMB 150/kg.”
Lastly, Megginson is also monitoring sales activity.
“We have seen an increasing number of public auctions and pre-auctions for spodumene concentrate,” he said. “This is definitely something to look out for and I expect to see more auctions for the remainder of the year, and some similar auctions taking place for lithium chemicals as well.”
Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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