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Lithium comeback: Will the price rise again thanks to production losses?
Lithium price rises again due to production losses - is the "new oil" coming back? Find out more about the latest developments in the lithium market.
Lithium comeback: Will the price rise again thanks to production losses?
Lithium, once traded as the “new oil”, went through an enormous boom phase in 2022, in which a ton of the light metal sometimes cost up to 80,000 US dollars. This development was largely driven by Tesla CEO Elon Musk, who emphasized high profit margins in the industry. Despite this, the price of lithium has fallen far since its 2022 peak, largely due to higher production volumes, falling demand for electric cars and growth problems in many economies.
China's Jiangxi province recently experienced production outages that impacted a quarter of China's lithium carbonate supply. These disruptions, along with temporary shutdowns of lithium mines due to the sharp drop in prices, resulted in a noticeable reduction in supply. In response, the price of lithium rose by about 13 percent since the beginning of the year, reaching its highest level since December. Deutsche Bank's chief investment strategist, Ulrich Stephan, explains this price increase with the aforementioned production losses in China.
Despite the temporary price increases, some analysts remain skeptical about a sustained rise in lithium prices. They predict that in the medium term supply will increase with the opening of new plants in Australia and South America, which could counteract the current shortages. Nevertheless, the lithium industry is optimistic and expects the electric car market to recover, especially with increasing consumer interest in electric cars and the expected increase in interest rate cuts.
Experts predict that electric cars will account for about half of global new car sales by 2035, which could lead to increasing demand for lithium. This could potentially lead to supply deficits after 2027 or 2028. Despite the current overproduction of lithium, analysts such as Frank Nikolic of CRU Group see a positive future for the lithium market, especially given the increasing demand for electric car batteries.