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With lithium prices languishing near
three-year lows and showing no signs a recovery is coming, attention is now
turning to whether miners will be forced to rein in supply of the battery
metal.
The price of the material that’s vital to the energy transition has plunged by around 80% since
late 2022, and Benchmark Mineral Intelligence sees the current glut deepening
through 2027. While some smaller producers have already cut output, the
question now is whether the bigger firms will choose to shutter mines and delay
projects from Australia to Chile.
Clearer indications of the intentions of
some top miners may be revealed in the coming weeks with the release of
quarterly production reports or earnings. The insights from Pilbara Minerals,
Mineral Resources, Albemarle and Arcadium Lithium may provide clues on what the
supply response might look like.
A prolonged period of low lithium prices
could “trigger a renewed wave of mine supply cuts and
project delays,” said Alice Yu, the lead metals and
mining research analyst at S&P Global Commodity Insights. Prices for
spodumene, a lithium-bearing raw material, dropped last week closer to the
level when mining output cuts previously occurred between mid-January and
end-February, according to data from Platts.
Lithium remains in the doldrums due to
slowing growth in electric-vehicle adoption and increased supply. Spot prices
of lithium carbonate in China have been hovering near the lowest since March
2021.
The market is expected to see a growth in
supply of 32% in 2025, outpacing demand expansion of 23%, according to
Benchmark Mineral. The surplus is set to peak in 2027 before a deficit returns
at end of the decade, the consultancy said.
Some smaller players have already reacted
to the prolonged price slump. Australia’s Core Lithium
said this month it would halt operations at its Finniss project. In China, two
of Zhicun Lithium Group Co.’s carbonate units will be
put into maintenance from this month.
The weaker demand-growth outlook for EVs
has continued to put downward pressure on lithium, with China’s market maturing while European and American consumers delay
purchases.
The EV tariffs imposed by the EU and US
against China products “have not only weighed on
sentiment but have led to a drop in real-world lithium hydroxide demand,” said Claudia Cook, an analyst at Benchmark Mineral.
Chinese industry giants Ganfeng Lithium
Group and Tianqi Lithium both swung to preliminary net losses in the first
half. While major miners such as Pilbara Minerals are still aiming to expand
output, there’s growing pressure on other miners to
curtail production.
“We’ve downgraded
supply forecasts for Brazil, Chile, Argentina, and Australia due to diminished
profit margins,” said Linda Zhang, the battery
materials lead for Asia Pacific at CRU Group.
Some producers are clinging on despite
having little to no profit margin, Benchmark Mineral’s
Cook added, citing reasons including maintaining a skilled workforce, avoiding
restarting-production costs, and preserving relationships with their buyers.
The stronger focus on supply comes as hopes
fade for a significant demand rebound this year, with the supply chain still
working through inventories and carmakers rethinking their EV strategies.
BloombergNEF last month slashed its EV sales estimates and warned that the auto
industry is falling further off the track toward decarbonisation.
The question now is how long lithium
companies will be able to maintain output should prices remain stagnant, or
even fall further.
Curtailments and project deferments are
expected to “peak next year,” and that could tighten the market balance in the medium term, CRU’s Zhang said.