“Lithium prices have fallen again this month, with rising inventories hitting the industry hard,” Bloomberg reported on the 24th. Due to oversupply and slowing demand, lithium carbonate prices plummeted by 80% in 2023. After a brief stabilization in 2024, prices began to decline again. Investor confidence has also been waning. Since the beginning of this year, the stock price of American lithium giant Albemarle Corporation has fallen by more than 30%, Americas Lithium Corp’s stock has dropped by over 50%, and Piedmont Lithium, which has a supply agreement with Tesla, has seen its stock price decline by more than 60%.
Susan Zou, an analyst at Rystad Energy, pointed out that the increasing supply and the anticipated summer off-season are dragging down lithium prices. She mentioned that a brief reduction in market supply at the beginning of the year, along with speculative buying by traders, supported a temporary rebound in lithium prices. However, the momentum for the price increase has now “mostly disappeared.”
Despite concerns over lithium prices, capital mergers and acquisitions among large global lithium enterprises have remained very active in recent months. Industry reports indicate that Warren Buffett is also increasing his investment in the upstream key material “lithium” for the new energy vehicle industry chain. On June 4th local time, Occidental Petroleum publicly announced that it had formed a joint venture with the energy division of Berkshire Hathaway to extract lithium.
Bloomberg’s forecast data indicates that by 2035, lithium demand in the battery industry will reach 3.5 million tons, nearly doubling the level of 2024. Although this prediction has been revised downwards from previous estimates, it still shows significant growth potential. Mo Ke, the founder of Real Lithium Research, told the Global Times on the 25th that the global trend towards energy electrification and increasing demand for lithium led to a sharp rise in lithium prices starting in the second half of 2021, with the market booming until the second quarter of 2022. Mo Ke stated that with the continuous release of new lithium project capacities, the market is now oversupplied. The rapid rise in lithium prices earlier required market adjustments, and the current lithium prices have largely returned to pre-surge levels.
Mo Ke believes that lithium prices have shown a five-year cyclical pattern over the past decade. With the clearance of excess capacity, the current downturn might see a turning point in 2025. He mentioned that global demand for new energy, including new energy vehicles and energy storage, remains optimistic, which will support a rebound in lithium prices. “Buffett’s entry into the market at this time may also confirm the market view that lithium prices have reached a bottom.”
Three Major Impacts of Falling Lithium Prices on New Energy Vehicles
According to calculations, for every 100,000 RMB/ton drop in lithium carbonate prices, the cost of a 10KWh battery decreases by approximately 700 RMB. For a vehicle equipped with a 60KWh battery, this results in a reduction of over 10,000 RMB in the cost per vehicle compared to the end of last year.
Beyond the superficial price reductions, there have been significant structural changes in the new energy vehicle (NEV) industry chain, primarily manifested in three aspects:
Firstly, the supply and demand for lithium resources are gradually balancing, shifting the focus from price wars to technological innovation battles, indicating the maturation of the entire industry. The price competition for lithium carbonate is nearing its end, with the next focus likely shifting towards technological innovation and high-quality products. China’s lithium extraction technology has reached a world-leading level in the fields of spodumene and lepidolite, but it still lags in the salt lake domain, which holds the largest global lithium reserves. Mass production in this area remains significantly constrained.
Currently, leading companies in salt lake lithium extraction technology, such as Zijin Mining and Wanli Stone, are using manganese-titanium adsorption lithium extraction technology, while Jinyuan Corporation employs electrochemical de-intercalation technology for lithium extraction from brine. It remains to be seen who will achieve a breakthrough first.
Secondly, NEV manufacturers are shedding their cost burdens, accelerating the replacement of fuel vehicles. The drop in lithium carbonate prices has had a significant impact on the downstream of the NEV industry chain. Companies like BYD are aligning the prices of their self-branded NEVs with those of equivalent fuel vehicles from joint ventures, further accelerating the replacement of fuel vehicles.
On the technical front, the core technology of NEVs is the “three-electrics” system, including the battery, motor, and electronic control system. The battery, being the heart of an NEV, plays a decisive role in determining its range. The decrease in lithium carbonate prices has alleviated the operational pressure on battery companies, allowing them to focus more on capacity building, technological development, and reducing the carbon footprint of battery products. This investment lays the groundwork for further enhancing the “heart” of NEVs. Additionally, the falling raw material prices have unlocked the market potential of energy storage businesses, filling a critical gap for the stable development of NEVs.
Thirdly, the healthy competition in the NEV market is gradually starting, leading to high-quality development that benefits consumers. The continuously decreasing resource costs are being transmitted downstream, eventually reaching the consumer end and lowering consumption costs. Recently, companies such as Geely Geometry, Volvo, and Chery New Energy have announced price cuts for their models on sale, bringing tangible benefits to consumers.
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