Electric Vehicle Growth Slows Amid Lithium Oversupply
Due to sluggish global electric vehicle (EV) sales, the price of lithium, a key battery material, is plummeting. With high interest rates and an economic downturn cooling EV purchasing sentiment, coupled with oversupply, forecasts suggest that lithium prices will continue to decline next year.
On the 22nd (local time), Chinese lithium carbonate traded at 133,500 yuan per ton in the global commodity market. It dropped 18.3% this month alone, bringing the year-to-date decline to 74.3%.
As EV sales decreased, lithium prices also fell. In the first half of this year, global EV sales reached 4,342,487 units. Although this represents a 41% growth compared to the same period last year, the growth rate has significantly slowed from 115% a year ago. China’s reduction of EV subsidies starting this year and the European Union’s (EU) efforts to slow EV adoption have influenced this trend. Additionally, interest rate hikes by major central banks and economic slowdown have dampened demand for relatively expensive EVs.
Oversupply caused by Chinese companies expanding lithium production capacity in anticipation of increased EV sales also pushed lithium prices down. While lithium prices surged nearly 90% last year, they have plunged over 70% this year, largely giving back last year’s gains. Prices of other key EV battery minerals such as nickel, graphite, and cobalt have also fallen about 30% since the beginning of the year.
The industry expects lithium prices to continue declining for the time being. With economic slowdowns in major countries including China, the United States, and Europe, the EV market is unlikely to regain momentum soon. SQM, the world’s second-largest lithium company, warned investors last week that lithium prices could continue to fall until the end of the year.
Global mineral companies are consecutively halting or postponing new lithium production or expansion projects. Albemarle, the world’s largest lithium company, recently stated that some companies have begun to restrain operations as lithium prices have fallen below mining economic viability. Albemarle lowered its projected net sales growth for this year to 30-35%, down from 40-55% three months ago.
Alan Ray Restauro, a researcher at BloombergNEF, Bloomberg’s energy research unit, analyzed, "With lithium supply expected to increase further next year, prices are likely to fall further," adding, "On the demand side, industry-wide sentiment toward EV sales is freezing up."
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