Lithium Prices Crash to Bottom in 12 Months

China: The rise of the electric-vehicle industry sent Lithium prices soaring. But with sales of EVs slowing, the price of the key battery ingredient has come back down to earth. In China, the average spot price of Lithium Carbonate dropped to 392,500 yuan ($56,451) per ton on Friday - a 23.1% decline since the start of the year and 31% lower than its November record high. As battery- and EV-makers across China are rethinking their future strategies, it looks like Lithium prices may remain low for some time yet.

Lithium prices are expected to take a hit this year, with analysts and experts predicting further declines due to an oversupply of the metal and slowed EV sales growth following reduced government subsidies and incentives. China Securities Co. Ltd. estimated that there could be an annual Lithium surplus of 18,000 to 179,500 tons by 2025 and prices might dip as low as 200,000 yuan per ton in 2024. The trend is reflected in recent data from the China Passenger Car Association (CPCA), which showed that EV and hybrid passenger car sales dropped 45% from December 2020.

China is cracking down on illegal Lithium mining activity, sending a team to investigate Yichun in Jiangxi province. The city is renowned for its abundance of the rare earth mineral, which has been subject to a two-year surge in prices that has attracted many seeking a quick profit.

The local government of Yichun issued a statement recently promising to act against illegal mining and trading of Lithium, in order to protect the resource and the interests of the public.

Lithium production in the city of Yichun has recently come to a halt due to an ongoing investigation. Despite this, analysts are confident that this temporary suspension will not have a large impact on the global Lithium market due to ample inventory stored by local miners. However, if the investigation takes a prolonged period, it could result in a disruption of supply as Yichun produces 25% of China's Lithium output - 120,000 tons of Lithium Carbonate in 2021.

Major companies like Ganfeng Lithium Group Co. Ltd., Contemporary Amperex Technology Ltd., and BYD Co. Ltd. have set up plants in Yichun, providing a strong foothold in the Lithium supply chain. The mining company, battery manufacturer and EV-maker are leading the way for other companies looking to capitalize on Lithium development opportunities in the region.