Challenging Lithium Market Leads to Supply Cuts, Project Delays

Lithium prices have been declining for years without signs of recovery, prompting concerns about potential supply cuts and delays in mining projects. Experts note that, in addition to these challenges, tariffs on EV from China have also negatively impacted the lithium market.

Since 4Q22, lithium prices have plummeted by approximately 80%, and Benchmark Mineral Intelligence forecasts that the current oversupply will persist and even increase until 2027. "A prolonged period of low lithium prices could trigger a new wave of supply cuts and project delays," said Alice Yu, Senior Analyst, S&P Global Commodity Insights.

Supply is anticipated to grow by 32% by 2025, which will exceed the forecasted 23% increase in demand. This oversupply is likely to reach its highest point in 2027, potentially leading to a deficit as the decade concludes, reported Bloomberg.

In response to this challenging environment, some players have already adjusted their operations. Australia's Core Lithium Ltd. recently announced it would suspend operations at its Finniss project. Similarly, two carbonate units of Zhicun Lithium Group Co. in China are scheduled for maintenance starting this month.

Benchmark Mineral reported that even with minimal or no profits, some producers will maintain operations to retain a skilled workforce, avoid the costs of restarting production, and sustain good relationships with their customers.

Last month, BloombergNEF lowered its EV sales forecasts, warning that the automotive industry is straying further from its decarbonization goals. Experts note that, in addition to low prices and supply cuts, tariffs on electric vehicles imposed by the European Union and the United States against Chinese products "have not only affected market sentiment but also led to a real-world decrease in lithium hydroxide demand," according to Claudia Cook, Analyst, Benchmark Mineral.