[Bojo, Battery] Lithium Prices Return to Pre-COVID Levels... Industry Recovery Slows Down

Lithium Carbonate Returns to Around 70,000 Yuan per Ton
Pre-COVID Levels... Concerns Over Prolonged Chasm

The price of lithium, a key mineral reflecting future demand in the electric vehicle (EV) and battery markets, has returned to pre-COVID-19 levels. This raises concerns that the EV and battery markets, which experienced rapid growth following the pandemic due to eco-friendly policies, may face slower recovery.

According to market research firm Trading Economics on the 14th, the price of lithium carbonate this month is currently around 77,500 yuan per ton (approximately 14.75 million KRW). This marks a return to the pre-COVID-19 price range of around 70,000 yuan per ton.

The price trend of lithium, a core mineral for EV batteries, can be divided into periods before and after COVID-19. Although prices fluctuated before 2020, the volatility increased significantly after the pandemic. The EV market experienced a boom amid climate crisis concerns triggered by COVID-19 and the resulting eco-friendly policies worldwide. In November 2020, prices dropped to 39,000 yuan due to the pandemic shock but began a strong upward trend as the U.S. and other countries introduced eco-friendly subsidies to promote EV purchases. By November 2022, prices even exceeded 570,000 yuan (approximately 108.51 million KRW).

However, after reaching historic highs, lithium prices have been on a downward trend for nearly two years. This is due to increased supply from mining companies rushing to capitalize on profitable lithium and EV demand falling short of expectations. Just six months after peaking, lithium prices fell to 170,000 yuan and have now dropped to the 70,000 yuan range.

The continued decline in mineral prices reflecting future demand raises concerns about a prolonged chasm (temporary stagnation in a growth industry). Although supply has increased, it indicates that future demand has not grown accordingly. Mining companies that initially increased supply are now announcing cuts one after another. It is expected to take more time for battery companies to recover profitability. Battery prices are based on mineral prices. During periods of rising mineral prices, battery prices also increase, boosting profits. However, if the decline continues, batteries made from minerals purchased at relatively high prices must be sold at lower prices.

The plunge in lithium prices is due to oversupply. Fueled by the EV boom in 2021-2022, major countries and companies worldwide rushed into mining development as lithium prices soared. However, contrary to expectations, the EV transition has been slow, causing lithium orders to plummet and inventories to accumulate. Consulting firm Benchmark Mineral Intelligence (BMI) forecasts that lithium supply will increase by 32% in 2025 compared to this year, far exceeding the 23% growth rate in demand. They predict that supply and demand will rebalance by 2029.