The near-term outlook for the lithium market appears uncertain, but as the year progresses, there is potential for price improvement, according to an analyst at KeyBanc Capital Markets.
Present Tense: Data from China, the major market for lithium, a metal used in electric vehicle batteries, showed continued destocking in lithium-ion batteries in December, said analyst Aleksey Yefremov in a note on Monday. He also noted lower lithium production and imports relative to electric vehicle manufacturing.
Lithium production was nearly flat month-over-month in China in December, but lithium-ion battery cell production fell 12%, even as new-energy vehicle sales in the country rose 12% to 945,000 units, the analyst said.
In the medium term, Yefremov forecasts lithium prices trailing reinvestment economics. Lithium manufacturer Albemarle Corporation (NYSE:ALB) forecast a lower expenditure of $1.6 billion to $1.8 billion for 2024, down from around $2.1 billion in 2023.
The company said this is part of a “series of proactive measures underway to re-phase its organic growth investments and optimize its cost structure in response to changing end-market conditions, particularly in the lithium value chain.”
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Improvement In The Cards? Going by the recent production curtailments for spodumene in Australia, and weaker production and recycling in China, the analyst expects rebalancing in 2024. There is likely to be a healthy rebound in price, he said. Spodumene is a mineral and an important ore of lithium, found predominantly in lithium-bearing granite pegmatites.
The analyst noted that some encouraging trends are beginning to emerge. While destocking will likely persist in the short term, cathode manufacturers, who go for planned maintenance in February around the Lunar New Year in China, will likely bring forward production into January, accelerating the destocking, the analyst said.
Also, Yefremov sees a demand lift from the conflict in the Red Sea, as international companies strive to bulk up on stockpiles. Supply is impacted by profitability challenges faced by non-integrated producers, the analyst said.
“The steep decline in spodumene prices has brought several miners near the cost curve, which may begin to offer price support for both lithium and its raw…
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