Tomorrow Investor

After a Rough Year, Lithium Expected to Bounce Back


2023 proved to be a challenging year for the lithium sector, but market watchers are optimistic that the industry is set for a big comeback this year.

According to analysts from global investment bank Liberum, lithium contract prices will be within the neighborhood of $34.30 per kilogram of battery-grade lithium carbonate this year. The group also forecast a potential market oversupply amounting to 55,000 metric tons.

Their counterparts at the Chicago-based financial services firm Morningstar echoed their optimistic forecast. Morningstar analysts, however, opted to veer to a more conservative estimate, pegging the average price of lithium per kilo to be around $30 well towards the end of the decade. They also forecast a major increase in global demand by 2030, mostly spurred on by more widespread adoption of electric vehicles as the world’s primary mode of transport.

The Factors Behind a Rough Year

One of the biggest reasons for the major drop in lithium prices was a significantly lower demand for EVs for much of the year. This, in turn, led to an equally lower demand for battery-grade lithium.

The resulting oversupply of lithium led to market instability and forced lithium firms to rethink their strategies.

Indeed, several major mining firms, particularly those listed in indices in the United States, saw adverse repercussions in their respective stock performances. American Lithium, in particular, saw its share price plunge by 46.5% as 2023 drew to a close. 

Its competitors Albemarle and Piedmont Lithium also saw their prices drop; 33.5% in the case of the former, and a decrease of around 37% for the latter.

A Major Merger

But despite these negative developments, 2023 was also quite a year for mergers in the lithium sector. 

One of the most notable of these deals was the one that resulted in the formation of Arcadium Lithium. Now the world’s third-largest lithium mining firm, Arcadium is a joint initiative of Australia’s Allkem and the beleaguered American mining firm Livent. 

Such a merger was seen in the industry’s confidence that, despite decreased demand and oversupply, the need for battery-grade lithium will remain strong for the long term.

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