A recent drop in the overall price of lithium in the global market is putting buyers on their guard as to the critical mineral’s performance in the coming year. Indeed, producers and buyers, particularly those in Asia, have been haggling back and forth about 2024 contracts and related matters.
Insiders point out that sales volumes are looking rather flat as 2023 draws to a close. This is despite an increase in sales volumes since 2020; likewise, buyers appear to be jonesing for greater discounts on their purchases.
The volatile nature of the global lithium industry has been highly visible throughout much of this year, what with the drop in share values for the likes of Albemarle Corporation and the Ganfeng Lithium Group. Likewise, thanks to a marked decrease in customer demand for electric vehicles (EVs), several lithium firms found themselves with a surplus of processed end-products on their hands.
A Changing Sector
Before the global pandemic, lithium buyers would opt for long-term supply contracts, the costs of which were based on a fixed price range. This changed over the past few years thanks to erratic prices wherein the cost of lithium would grow exponentially, much to the consternation of battery makers and the automotive sector.
As a result, most lithium contracts now come in the form of annual agreements similar to those of more common metals like iron and copper; premiums or discounts are determined based on how much the commodity is on the market during that point in time.
Many firms are renegotiating their contracts at this point, most of whom will be on the negotiation panel until the last working day of the year. Interestingly, despite overproduction on the part of some producers, most supply volumes have stayed where they’ve been since last year.
Most of the deals under discussion are looking at discounts running between five and ten percent based on current spot prices. Likewise, Asian buyers remain the largest players; while most are from China, Japanese and Korean buyers are not far behind.