Due to an increase in demand, lithium – the mineral used in the production of rechargeable batteries and the element of choice for renewable energy initiatives – is presently in short supply throughout the world. Consequently, its price has soared.
As of press time, raw lithium sells for around $6,000 per ton. In turn, the cost of production of rechargeable batteries for electric vehicles (EVs) and other appliances has increased by 30%.
But there appears to be a light at the end of the tunnel. According to analysts at Credit Suisse, it is highly possible that the price of lithium could be three times lower within the next eighteen months.
A Potential Price Drop
Saul Kavonic, Credit Suisse’s head of energy resource research, opines that the global lithium market may return to an equilibrium state or, better yet, be in surplus by next year – a notion that was considered impossible earlier this year.
Kavonic also predicts that the price of lithium could drop by more than half, settling at $2,500 per ton.
It is a sentiment shared by other market analysis firms, including Goldman Sachs whose most recent forecast predicted a sharp correction in the price of lithium.
Just last week, the collective value of lithium company stocks listed on the Australian Stock Exchange plummeted as several financial firms presented their revised forecasts on the price of the said commodity.
What Does This Mean for the Industry?
Given the current shortage and surging prices, how is this even possible? For one thing, more lithium mining zones and processing areas are being built in countries where the element is plentiful.
Based on its government’s own forecast as of March 2022, Australia – already the world’s largest exporter of lithium ore – expects to triple its production within the next four years.
Firms like Core Lithium are currently building new mines, with the latest currently in development in Darwin. The company expects to start shipping out lithium ore from the site as early as the end of this year.
Core Lithium chief financial officer Simon Iacopetta says that the feasibility of the Darwin site was determined by a long-term forecast wherein prices could go as low as $1,000 per ton of lithium ore that makes it to market. Iacopetta added that the price decrease predicted by both Credit Suisse and Goldman Sachs is somewhat overstated. He believes that the shortfall of supply will result in prices continuing to rally upward in the near future.