Spodumene costs, a key uncooked materials for lithium manufacturing, have hit their lowest ranges since August 2021, pushed by a major hunch in lithium chemical costs. With main producers feeling the warmth, the lithium market faces turbulence.
As of September 4, spodumene FOB (Free on Board) Australia costs fell 14.4% this yr, reaching $818 per tonne, based on the Benchmark Lithium Price Assessment. This represents a large drop from their December 2022 peak of $6,401 per tonne—a fall to simply one-eighth of their highest worth.
The decline is basically attributed to the falling costs of lithium chemical substances, which spodumene costs are likely to comply with carefully.
Along with this lithium price drop, there’s one other issue at play: excessive stock ranges. Spodumene suppliers and producers in China proceed to flood the market to take care of their share, at the same time as costs fall.
A New Competitor Emerges within the Lithium Race
Spodumene isn’t the one recreation on the town anymore. Costs for lepidolite, one other lithium-bearing mineral, have additionally dropped sharply, notably in China.
In August, lepidolite costs fell considerably, making it a extra enticing possibility for lithium producers. This shift has additional lowered demand for spodumene, accelerating its value decline.
Actually, through the two-week evaluation interval ending on September 4, spodumene costs noticed a 3.3% decline. The rising curiosity in lepidolite as a feedstock, mixed with present stock surpluses, continues to create a bearish outlook for spodumene producers.
Benchmark’s information additionally revealed sharp declines within the spot prices of lithium carbonate and lithium hydroxide in China. Lithium carbonate costs have fallen 23.8% this yr, whereas lithium hydroxide costs have dropped 15%. These declines in lithium chemical substances mirror the challenges confronted by spodumene producers and replicate broader market dynamics.
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Producers on the Ropes: The Ache of Falling Costs
The present lithium price environment is especially difficult for spodumene producers, particularly these with greater manufacturing prices. As costs strategy the $800 per tonne mark, many higher-cost producers are discovering it more and more tough to take care of profitability. Some are being compelled to make powerful selections, reminiscent of slicing manufacturing or delaying enlargement initiatives.
Adam Megginson, a senior analyst at Benchmark, defined:
“As we have approached the $800 a tonne mark, we have started to hear lower bids, but they have not closed. So, we’re beginning to see resistance at these levels.”
Producers face a dilemma: saying manufacturing cuts might sign to the market that they’re struggling to maintain up with the worth setting. On the similar time, many lithium producers need to maintain working to be able to seize market share as soon as costs rise once more. Because of this some upstream gamers proceed to supply even when costs fall under their operational prices.
As an illustration, Arcadium Lithium just lately introduced that it plans to put its Mt Cattlin mine into care and upkeep by 2025 as a result of low-price setting.
Nevertheless, Greenbushesa significant spodumene producer, seems to be weathering the storm. Its enlargement, anticipated to ramp as much as 60,000 tonnes per yr of lithium carbonate equal (LCE), remains to be on observe to go surfing subsequent yr.
In distinction, initiatives in Africa, that are principally owned by Chinese language corporations, have continued with out pause, pushed by vertical integration inside the Chinese language market.
Extra Clouds Earlier than the Storm Clears
Sophia Jang, Benchmark’s analyst, famous that any value will increase this yr are unlikely to be important. Nevertheless, she did counsel that there might be a short-term spike in costs in late September as Chinese language cathode producers look to safe supplies forward of China’s Nationwide Day Golden Week on October 1.
Wanting additional forward, the fourth quarter sometimes sees greater demand for electrical automobiles, which might assist stabilize demand for lithium. Nevertheless, it stays unsure whether or not this shall be sufficient to drive a significant restoration in spodumene costs.
The Lengthy Recreation: $1.6 Trillion Wanted to Meet Future Demand
Whereas the lithium market is experiencing short-term turbulence, the long-term outlook stays bullish.
Benchmark’s Lithium-ion Battery Database forecasts that no less than $1.6 trillion in funding shall be wanted to fulfill battery demand by 2040. That is nearly triple the $571 billion requirement to fulfill demand by 2030.
Battery demand might develop considerably within the coming years, from 937 gigawatt-hours (GWh) in 2023 to three.7 terawatt-hours (TWh) in 2030. This demand will double once more between 2030 and 2040, highlighting the immense want for brand spanking new funding in lithium manufacturing, processing, and battery manufacturing.
- A good portion of this funding—44%—will go in direction of constructing gigafactories, which is able to produce battery cells and assemble battery packs.
Recycling may even play a significant function in assembly future lithium demand. As extra EVs attain the top of their helpful life, the battery scrap pool is ready to develop considerably. In line with Benchmark, $26 billion shall be wanted by 2030 to construct the capability to recycle this scrap into usable battery supplies. By 2040, this determine will rise to $157 billion.
Lithium Takes the Lead
Amongst important uncooked supplies, lithium would require the biggest funding to fulfill future demand. By 2030, $94 billion is required to scale lithium productionwith this determine doubling by 2040.
Whereas the present lithium market could also be dealing with challenges, the long-term trajectory stays optimistic. That is primarily pushed by the expansion of electrical automobiles and renewable power storage. Spodumene producers could also be navigating tough waters now, however these that may climate the storm are more likely to profit from future demand progress.
