Lithium may be one of the hottest commodities these days, but the price has rapidly declined over the past several weeks, surpassing experts’ forecasts for the last quarter of 2022.
Chinese lithium prices, in particular, have been hit hard. Over the past four weeks, the price of lithium in the country has plunged by around 34%. Experts note that this is due to a recent drop in electric vehicle demand, resulting in an overstock of the mineral.
In contrast to last year, when there was barely any stock of lithium to be found anywhere, there are currently tens of thousands of tons of readily-available lithium in the market,
According to cross-commodity price reporting agency Fastmarkets, the spot price for lithium carbonate dropped to around $38,079.06 as of Friday, March 24th. This is a drop of over 50% from the price quoted in the fourth quarter of last year.
An Unexpected Challenge
China is considered the world’s largest market for electric vehicles, but its government’s recent reduction of subsidies to the industry led to a significant reduction in demand.
Likewise, the domestic electric vehicle industry has been challenged by the conventional vehicle sector in terms of price.
Well ahead of the imposition of stricter rules regarding vehicular emissions on July first of this year, companies like SAIC Volkswagen Automotive Company and Geely Automobile have drastically dropped the prices of over 40 car brands. This is being done to clear out stocks of cars that do not meet the new environmental standard.
According to Vicky Zhao, Fastmarkets’ senior analyst in Beijing, this unexpected development will cut into the market share for electric vehicles for a while, potentially well into the second quarter of this year. However, China’s entire automotive supply chain may end up sharing profit losses come the end of 2023.
Lower Prices Elsewhere
Meanwhile, lithium’s price has also decreased in the West, though not as sharply as in Asia. Also, while stocks of the metal are increasing and experts present a much stronger outlook regarding EV sales this year, supplies remain tight in Europe and the United States.
As of March 16th, the price of lithium carbonate in the west dropped by 24% to $61.50 per kilo. This is a significant decrease from the $81.00 per kilo seen in late 2022.