Lithium Metal Prices Plunge in European Market Amidst Weakening Downstream Demand

At the end of the week of October 2023, the price of Lithium Metal continued the declining trend in the European spot market as the demand from the downstream battery industries decreased. The market players anticipate a further downward trend for the upcoming months as the fear of a hike in the federal interest rate would hampers trade in the local and overseas markets. The Automotive and battery manufacturers are placing new deals and lowering their production capacity to overcome the overaccumulation risks.

Battery suppliers in Europe are facing challenges as they are hesitant to restock their inventory and prioritize the depletion of their existing stock. This has resulted in insufficient demand for upstream Lithium Metal materials, leading to a consistent drop in the price of Lithium Metal in European markets. Both the Electric Vehicle (EV) and energy storage sectors are experiencing sustained weak demand, causing battery suppliers to slow their procurement of raw materials. Market leaders predict that a significant improvement in demand is unlikely before the year's end. The energy storage sector has seen a noticeable decline in order volumes, mainly due to reduced demand from overseas markets, resulting in disrupted export orders for battery suppliers. This has led to increased industry inventory levels and intensified competition in battery pricing. Panasonic, a global battery manufacturer, has attributed the lower demand for Lithium Metal in the downstream battery industries to Tesla's recent underperformance. Tesla fell short of revenue expectations in the latest quarter, with its core profit margins affected by planned factory shutdowns and price reductions. Market participants are also concerned that high-interest rates will continue to hinder the affordability of Tesla's vehicles, primarily due to the declining prices of EV raw materials such as Lithium Metal, nickel, and cobalt.

In order to mitigate these risks, the automotive and battery industries are exploring new agreements to stabilize Lithium Metal consumption. A major automotive manufacturer, BMW has recently announced plans to establish its battery manufacturing facility to counter Tesla's competitive pricing. Furthermore, BlackRock has expanded its offerings in transition metals, including Lithium Metal and battery producers, with the iShares Lithium Metal & Battery Producers UCITS ETF (LITM), listed on Euronext Amsterdam with a total expense ratio of 0.55%. Additionally, the use of Lithium Metal is set to increase as the European Commission approves a €659 million French State aid measure to support Verkor in their research and development of innovative batteries for electric vehicles.

According to ChemAnalyst, the price of Lithium Metal is anticipated to decline in the forthcoming months as the demand from the downstream Automobile and battery industries remains in a southward shifting trend. The further increase in interest rate by the domestic federal reserves is expected to keep a wait-and-watch situation among local and overseas buyers of European Lithium Metal.