Lithium Sees 25 Percent Price Drop

Lithium price is going to drop in 2023, potentially offering relief to electric-vehicle makers squeezed by soaring costs, according to a Chinese supplier of the battery metal.

After two years of prices labeled as “insane” by Elon Musk, CEO, Tesla, and “unreasonable” by China’s BYD, lithium will become less expensive as more supply emerges to cut abnormally high margins for lithium producers, Wang Pingwei, President, Sinomine Resource Group Co., told Bloomberg.  

“We believe the gradual, downward trend for lithium will continue next year,” said Wang, predicting a drop of around a quarter from current levels that will still leave the company with “good” profits. However, “prices will not fall off a cliff as the market remains tight,” he added.

Sinomine Resource Group Co. is a Chinese company that provides solid mineral and metal exploration equipment for mining, among other services. The company has an annual production capacity of 25,000 tons of battery-grade lithium hydroxide and battery-grade lithium carbonate. Sinomine operates mines in Zimbabwe and Canada.

Lithium has risen since 2020, hurting buyers and contributing to the first annual increase in battery costs since BloombergNEF started tracking them a decade ago. Despite declining this month, benchmark prices in China are still about twice as high as the start of 2022, as demand for EVs exceeds supply.

Lithium carbonate prices reached a record of nearly US$87,000/t in November 2022, according to Asian Metal Inc. However, prices will drop to about US$57,400/t during 2023, said Wang. More mine supply will push the market into a surplus next year and help soften prices, agrees Stella Li, Executive Vice President, BYD.

In addition, China announced it will withdraw EV credits which, in addition to uncertainties over the pandemic and global economy, are also weighing on the lithium outlook. “Over the next six months, demand softness is likely to dominate the lithium price discussions as demand in China is challenged by zeroing subsidies and surging COVID-19 cases,” said Alice Yu, Analyst, S&P Global Commodity Insights. “Consumers in the West face growing affordability issues,” she added.

While Mexico still has an incipient domestic market for EVs, the country is playing an increasingly important role in the manufacturing of these vehicles in the US, with several Tier 1 suppliers working directly with EV automakers.

Mexico is looking to develop a plan to harness lithium exploitation under the lead of LitioMX. Recently, authorities created a backup plan to include the private sector in case it needs support. However, the plan might not be as viable as the government expects it to be, reported MBN.