Future of Lithium Supply Depends on Battery Makers! Why Surplus is Here to Stay

In the realm of electric vehicle (EV) batteries, lithium mines are bustling with activity, thanks to Chinese operators spearheading the charge. Despite weak prices that would normally prompt mass output cuts, these mines are forging ahead, much to the delight of battery makers. However, this unyielding production trajectory could pave the way for years of oversupply and subsequent price stagnation.

1. Support from Battery Makers: In a bid to ensure a steady stream of lithium, some battery manufacturers have taken matters into their own hands. Company reports reveal that certain players either own lithium mines or have infused capital into mining operations to sustain their functionality.
2. Market Share and Good Relations: Beyond financial motivations, many mines are keeping their wheels turning to secure market share and maintain favorable relationships with governments. The specter of technical issues that may arise from closures and restarts is another driving force behind this continued production streak.
3. Global Supply Dynamics: While a handful of lithium producers have resorted to temporary mine closures and output reductions to stem losses, many others are soldiering on. Analysts predict that this persistence may extend the era of global supply glut for several years, keeping prices subdued in the lithium market.
4. Price Plunge and Supply Forecast: The price of lithium hydroxide has plummeted by almost 90% from its peak in December 2022, signaling a dramatic shift in market dynamics. UBS forecasts a substantial 25% increase in global lithium supply this year, followed by a 15% surge in 2025.

In light of this scenario, it becomes apparent that certain lithium assets currently in production are treading treacherous waters. Approximately 10% of production is running at a loss, a risky yet unavoidable scenario in the current landscape. Despite China’s high lithium mining costs, Chinese-owned mines in strategic locations like Australia and Africa continue to operate due to their crucial position within downstream supply chains.

China’s Zimbabwe Ventures:

• Amidst the lithium milieu, Chinese companies have heavily invested in Zimbabwe, propelling the country to become a significant global lithium supplier. Despite facing profitability challenges, all four operational mines remain active, underpinned by China’s interest in securing international lithium supplies and safeguarding supply chains.

Australia’s Lithium Landscape:

• Down under, companies are adopting diverse strategies to weather the storm of high lithium costs. MinRes, for instance, has chosen to put its Bald Hill mine under care and maintenance while keeping other mines operational albeit at reduced capacities. This approach, solidified by partnerships and diversified production, exemplifies the resilience in the face of market turmoil.

In conclusion, the lithium market’s complex dance between supply, demand, and strategic interests underscores the intricacies of the EV revolution. As battery makers, miners, and investors navigate this landscape, adaptability and strategic foresight will be paramount in charting a path towards sustainable success in the electrified future that lies ahead.