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Why Lithium Prices Crashed by 80%
Tsvetana Paraskova

Slowing growth in electric vehicle sales, including in the top EV market, China, and a market oversupply in battery metals sent lithium prices crashing by 80% in the past year, prompting lithium miners to pause and scale back expansion projects.   

China's EV sales continued to grow last year but fell short of expectations. On the other hand, raw material providers, which had rushed to mine lithium in the past two years to meet growing demand, have outproduced the current demand. As a result, lithium prices crashed last year by over 80% to the lowest level since 2020, at $13,200 per ton, Benchmark Mineral Intelligence says, as carried by the Financial Times.

Lithium Oversupply 

As miners accelerated lithium production in 2022, the market swung from a supply deficit in 2022 to a surplus in 2023. Add to this slower Chinese EV sales than in previous years, and the perfect storm on the lithium market was created—too much supply, faltering demand. 

The lithium supply response has charged ahead of demand, price reporting agency Fastmarkets said in a report this week. 

"Market participants expect downstream lithium demand to remain relatively weak and with no imminent concerns about supply shortages, we forecast a tentatively balanced market in 2024," according to Fastmarkets. 

Some restocking could occur in the second quarter of 2024, leading to a mild recovery in lithium prices, but they are set to "generally trend down for the second half of the year," Fastmarkets' analysts noted. 

In December, a Chinese lithium seller told Fastmarkets,

"Although we had some sales to the end consumers, the volume is very small. Consumer demand was very thin." 

EV Growth Slows

Demand growth has slowed while stockpiles of battery metals have increased, putting downward pressure on lithium prices.

In China, the world's top electric vehicle market, EV penetration has continued to grow, but China's retail EV sales volume growth has fallen considerably, according to Goldman Sachs

Chinese EV sales grew by 1.5 million units between January and October 2023, compared to 2.3 million unit sales in the same period of 2022, "pointing towards a normalisation in supply chains," Goldman Sachs's research analysts wrote in a note at the end of November.  Related: Red Sea Disruptions Force Saudi Aramco to Slash Prices

"Most battery materials and components are seeing a softening in their balance as our batteries analysts note while 'greenflation' concerns are now abating. The accelerated supply expansion and battery capex surge from past 18 months has pushed China's battery balance into a surplus, which in turn has weighed on restocking demand for lithium," the investment bank said. 

"The supply chain normalisation combined with phase-out of national subsidies in China has also weighed on the pace of growth of EV demand," according to Goldman's analysts. 

"[T]he softening in the lithium market has become incrementally apparent with the slowdown in demand growth now in direct contrast with growing global lithium supply."

In China alone, there appears to have been a surplus of over 200 GWh of lithium-ion batteries last year, Wood Mackenzie said in a 2024 outlook on EV and battery supply chains. 

"Automakers are likely sitting on secured cell supply for EV sales that failed to materialise," WoodMac's analysts wrote.

Lithium Miners Scramble to Withstand the Price Crash

As a result of oversupply, weaker EV demand growth, and crashing prices, some of the biggest lithium miners have started to take measures to mitigate the impact on profitability.  

Albemarle, one of the world's top lithium producers, said last week it was re-phasing larger projects, reducing capital expenditures, deferring some spending, and planning job cuts, to "optimize its cost structure in response to changing end-market conditions, particularly in the lithium value chain." 

Albemarle will prioritize permitting activities at the Kings Mountain spodumene resource and defer spending at the Richburg mega-flex lithium conversion facility, as well as defer investment for the Albemarle Technology Park in North Carolina and limit sustaining capital spending to the most critical health, safety, environmental, and site maintenance projects.? 

"The company is also pursuing actions to optimize its cost structure, reducing costs by approximately $95 million annually, primarily related to sales, general, and administrative expenses, including a reduction in headcount and lower spending on contracted services," Albemarle said. 

Pure-play lithium company Pilbara Minerals warned that it is "unlikely that a dividend will be paid for the half-year ended 31 December 2023," as the company looks to further preserve its balance sheet position. 

Pilbara's estimated realized sales price for spodumene concentrate in the December quarter was down by 50% on the prior quarter.

Core Lithium announced on Wednesday a temporary suspension of open pit mining operations to preserve cash. 

Liontown Resources said on Monday it had initiated a review of the planned expansion and associated ramp-up of Kathleen Valley to preserve capital and reduce the near-term funding requirements of the project. 

"The recent material decline in spodumene prices has triggered significant reductions in short and medium-term lithium price forecasts," said Liontown Resources, which also announced it had failed to finalize a previously agreed US $500 million (AUS$760 million) debt funding package. 

The finalization of the debt package "has been impacted by recent reductions in the independent forecast pricing for spodumene upon which the lenders' credit approvals were based," said the company, whose shareholders include mining billionaire Gina Rinehart, Australia's richest person.

By Tsvetana Paraskova for





Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.

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