As concerns mount over a potential slowdown in the global electric vehicle (EV) adoption rate, the world’s largest lithium producers have reaffirmed their bullish outlook on the long-term demand for this crucial battery material, despite recent price drops.
Lithium giants, including LG Energy Solution, General Motors, and Honda, have, in recent weeks, adjusted their EV expansion plans, partially in response to rising interest rates, which have subsequently sparked fears of a supply surplus in the lithium market.
A basket of lithium prices, which exhibits regional and type-based variations and is monitored by Benchmark Mineral Intelligence, has witnessed a drop of over 60% this year.
Although demand for this ultralight battery material is still projected to increase this year when compared to 2022 levels, the industry’s fervent growth expectations have been somewhat tempered by underwhelming quarterly reports from major players like Albemarle, Pilbara Minerals, and Livent.
In Australia, the world’s largest lithium-producing nation, Pilbara Minerals has emerged as the most-shorted stock on the Australian Stock Exchange, indicating a prevailing negative sentiment regarding lithium demand.
This bearish sentiment has had repercussions beyond just lithium producers. Lithium Royalty Corp, a lithium investor, has seen a decline of over 37% in value since its Toronto listing earlier this year. The Global X Lithium & Battery Tech ETF has also dipped by 18% in 2023.
Chris Berry, an independent lithium analyst and consultant, has advised clients to consider a range of prices for this critical battery material, not solely relying on the spot price. He emphasizes that current prices remain substantially higher than historical trends and suggests that the recent spot price decline does not reflect a commensurate drop in demand.
In recent discussions with investors and analysts, lithium producers have regarded the market’s volatility as a short-term phenomenon, reiterating their belief in the sustained growth of electrification.
“We see what’s happening now as road bumps, but certainly not a determinant for the long-term growth we have,” stated Eric Norris, the head of Albemarle’s Energy Storage division, following the company’s revision of its annual forecast and disappointing quarterly results.
Livent, a supplier to BMW and Tesla, remains confident in strong lithium sales despite its own lackluster results. Livent CEO Paul Graves emphasized, “We see (lithium) supply continuing to be the constraint on demand.”
Pilbara Minerals recently acknowledged a “softening market backdrop” and ruled out share buybacks or special dividends for shareholders. However, company executives clarified that this decision stemmed from a prudent approach in the current environment.
“Demand is absolutely there,” asserted Pilbara CEO Dale Henderson. “It’s just a case of moderating pricing. It’s still a very healthy market.”
Mineral Resources, which operates lithium mines alongside Albemarle and Jiangxi Ganfeng Lithium, described the current market state as a “rebalancing” of supply chains.
Meanwhile, IGO, with a stake in a joint venture controlling Greenbushes, the world’s largest lithium mine, has acknowledged ongoing market volatility but remains confident that the industry’s challenges are of a “near-term” nature.
