Tomorrow Investor

Lithium Prices Soared in 2022 – Now What?


The global lithium sector had quite a year as businesses reopened, countries began to fast-track their carbon-neutrality initiatives, and the worldwide demand for the mineral grew bigger than the current supply.

According to Benchmark Mineral Intelligence’s report as of December 12th, 2022, the lithium index was up by 152.4% year to date – a figure that could rise to 182.6% year on year.

Likewise, industry professionals continue to mull the implications of a report released by Goldman Sachs in the second quarter of last year wherein its analysts predicted a notable correction in lithium prices by year’s end or within the first weeks of the new year.

Supply and Demand

The pressing issue affecting the lithium industry as well as fields dependent on it like the consumer electronics and electric vehicle industries is the very real possibility that overall demand could exceed supply by a huge margin.

Daniel Jimenez of iLi Markets is one of those who believes that lithium supply won’t be able to match demand for at least three more years. This is due to the fact that many greenfield projects have yet to start production; even then, it will take time for them to hit full capacity.

Jimenez added that, despite the constantly increasing demand for lithium, investments into lithium have come in slowly. Indeed, he feels that it will take six to ten years for the industry’s production capacity to catch up if investments continue to trickle in at such a slow rate.

The Situation in China

No discussion of the lithium sector would be complete without mentioning its biggest player: China.

In the third quarter of last year, the price of lithium in China’s domestic market rose steadily despite macroeconomic headwinds elsewhere. China also appeared unaffected by the economic downturn felt across the globe in the second half of the year.

The country’s electric vehicle sector actually performed well even if the rest of the Chinese manufacturing sector struggled because of the country’s overly strict zero-Covid policies.

Not Much Impact

According to industry analyst Daisy Jennings-Gray, weakening demand in traditional lithium-using sectors in Europe and North America did little to affect the price of lithium as supplies remained meager everywhere.

Jennings-Gray added that, due to the fact that limited additional supplies came through in the third quarter, it is likely that the  global lithium supply will remain tight and prices will stay high in 2023.

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