Lithium prices have plummeted nearly 90% from their 2022 peak, as supply outpaces demand in the critical battery metal market, industry analysts report.
The price collapse has wiped out gains made during the 2021-2022 surge, despite rising electric vehicle adoption, particularly in China. Slowing EV sales outside China have further dampened demand.
Last week, unconfirmed reports that China’s Contemporary Amperex Technology (CATL) suspended production at one of its lithium mines sparked a modest market reaction. Lithium futures in China rose about 4%, while shares of global lithium miners surged.
CATL, which did not confirm the suspension, said it was “making adjustments” to production. The mine represents approximately 5% of global supply, according to UBS.
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Despite recent gains, lithium stocks remain significantly below their 2022 highs. Albemarle Corp (NYSE: ALB) has jumped 14% since the CATL reports, while Australia’s Pilbara Minerals (ASX: PLS) gained 19%.
Analysts caution against expectations of a strong rebound. JP Morgan reports lithium carbonate inventory in China at a record 130 kilotons. Goldman Sachs estimates next year’s supply could exceed demand by 57%.
UBS estimates that current lithium prices are already lower than CATL’s cash cost for production. However, as an integrated battery maker, CATL might have more tolerance for losses in one part of its business. Analysts suggest prices are unlikely to fall much further if global production is to remain economical.
Chinese lithium producers, with stronger cash positions compared to the 2018-2020 downturn, may continue expansion plans, potentially limiting price recovery.
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