Lithium price declines steepened in China Monday, with battery-grade lithium carbonate prices seeing their biggest-one day drop of the year, a new report says. Lithium stocks rose broadly Monday.
A separate report Monday foresees last year’s lithium shortfall, which led spot prices to more than triple between November 2021 and November 2022, shifting to a surplus in 2023.
The average price of battery-grade lithium carbonate fell by 12,500 yuan per ton ($1,814 per ton) from last Friday to 312,500 yuan per ton Monday, data tracked by CnEVPost
That is down 3.85% from Friday, which the report called the biggest drop of the year.
As of March 20, lithium carbonate prices are down about 47% from last November’s peak near 600,000 yuan and are down about 40% year to date. A recent Reuters report, citing traders and analysts, said the market is set to drop a further 25% by year end to below 300,000 yuan.
For EV makers, falling prices could ease cost pressures. For lithium miners, the price declines have whacked shares.
On a March 1 earnings call, Nio management said that they expect lithium carbonate prices to fall to 200,000 yuan per ton this year, boosting gross margins. On Feb. 15, Livent gave disappointing sales outlook for 2023.
Lithium carbonate is used to make lithium-ion batteries. Electric vehicles (EVs) make up 80% of lithium-ion battery demand, with companies racing to build better EV battery technology.
Lithium Stocks, EV Stocks
Shares of Albermarle (ALB) and Livent (LTHM) rose 2.5% and 0.9%, respectively, in stock market trading Monday. Sociedad Quimica y Minera (SQM) popped 3.2%. Piedmont Lithium (PLL) eased 0.4%. Lithium stocks broadly remain below key moving averages after their earnings tumble in February. ALB stock has cratered more than a third since last November.
Nio (NIO) jumped 5.7% to 8.73 Monday, far below the 50-day moving average.
Lithium Price Plunges
A combination of factors have led to the lithium price plunge.
Late last year, EV demand slowed sharply ahead of the end of subsidies used to stimulate sales in China, the world’s biggest and fastest-growing market for electric vehicles.
This year, rare discounts from Chinese battery giant CATL to automakers hastened the price decline.
Now, the likes of Albermarle and Livent are bringing new capacity online, while existing mines like Sociedad Quimica y Minera’s Salar de Atacama expand aggressively.
In fact, Bank of America Securities says the lithium shortfall that set prices soaring in 2022 could turn into a surplus in 2023, with “a lot of supply coming out” from mines.
“We are expecting 38% lithium supply growth this year. That’s why 2023 is likely to turn into a surplus year for lithium,” the bank’s head of Asia-Pacific basic materials Matty Zhao told CNBC Monday.
Since 2021, the rapid rise in lithium prices has fueled new supply streams, Zhao says.
China’s EV market nearly doubled in 2022 and is expected to sharply slow to around 31% growth in 2023. Zhao predicts a 22% gain this year.