Just over a year ago, lithium prices skyrocketed, fueled by sky-high expectations for an electric vehicle revolution. But that surge? Nothing more than a fleeting mirage.
Once hailed as the tech industry’s golden commodity, lithium prices have spiraled downward.
Now, with prices in free fall and uncertainty casting long shadows, the lithium market stands on the edge of uncertainty.
Lithium prices have plummeted by up to 87 per cent, sending shockwaves through an industry that was once booming with promise.
The sharp drop, driven by slowing EV demand in crucial markets, has cast doubt on the future of the lithium rush.
Now, a new variable has entered the scene: direct lithium extraction (DLE) technology.
Reversal
In a stunning reversal, lithium carbonate and lithium hydroxide—the two most traded forms of the metal—sank below $10,000 per tonne in September, a staggering 87 per cent plunge from their peak of $80,000 per tonne in 2022.
It’s the first time in three years that prices have dipped into four-digit territory, rattling the market.
Market influencers
Due to the buyers' market, some lithium mines have been shuttered, leaving the industry reeling in shock as China’s tidal wave of oversupply floods the market.
Yet, as prices continue to crumble, paradoxically, the future of batteries glows brighter than ever. The biggest factor for the spike in demand: government incentives, manufacturing as well as technological innovations.
Many governments are offering subsidies, tax breaks, and other incentives to promote the adoption of EVs.
There's also the influence brought by a hybrid mining technique such as direct lithium extraction system being used by Exxon, as well as recycling, and alternative battery chemistries on the price of the metal.
There also emerged some variations in lithium prices based on geographic location, mining regulations, and transportation costs.
And amidst the on-going price crash, there’s a glimmer of opportunity. New extraction technologies are emerging as less environmentally destructive alternatives to traditional lithium mining.
How DLE process works:
1. Brine Extraction: The brine containing lithium is extracted from its natural source.
2. Pre-Treatment: The brine may undergo pre-treatment to remove impurities or concentrate the lithium content.
3. Lithium Extraction: The lithium ions are selectively extracted from the brine using specialised materials or processes. These materials can be ion exchange resins, adsorbents, or membranes.
4. Lithium Recovery: The extracted lithium is then recovered from the material used to capture it. This can involve washing, elution, or precipitation.
Nine-fold rise in demand
Other key factors: improvements in self-driving system, as well as increased demand for home- and grid-scale energy storage, alongside the spike in the use of solar and wind power.
Demand for lithium is forecast to skyrocket, averaging 25 per cent from 2022 to 2027, as per Technavio. By 2040, demand is projected to surge ninefold (900 per cent), fueled by the switch to EVs and renewable energy storage.
This looming surge has cast the industry into a whirlwind of challenges and opportunities alike.
Cathode cost
Beneath this volatile pricing landscape lies the heart of the battery’s cost structure: the cathode.
A silent ruler, responsible for over half of the overall battery price, its fluctuations send shockwaves through the entire industry.
Visual Capitalist, citing Benchmark Mineral Intelligence, lays out the stunning evolution of battery prices: from $290 per kilowatt-hour in 2014 to just $103 in 2023, a 64.5-per cent drop in 10 years.
$ 103
Price of lithium-based batteries per kWh in 2023, from $290 per kWh in 2014As this price freefall continues, further declines are expected predicted in the coming months as China’s massive production ramp overshadows demand.
Paradox
Despite the lithium price collapse, the world’s appetite for batteries is set to explode. By 2040, the battery industry’s capital expenditure is expected to soar from $567 billion to an astronomical $1.6 trillion, with China keeping its pole position in EVs and batteries.
It’s a race against time and economics, as the global energy industry braces for a seismic shift.
Top lithium-producing countries:
The top five lithium-producing countries by volume (2023 estimates) are:
- Australia: ~47% of global production (approximately 61,000 metric tons)
- Chile: ~30% of global production (approximately 39,000 metric tons)
- China: ~15% of global production (approximately 15,000 metric tons)
- Argentina: ~8% of global production (approximately 6,200 metric tons)
- Brazil: ~1% of global production (approximately 1,300 metric tons)
These rankings are based on production volumes and can fluctuate yearly based on market demand and production capacity.
Behind this US ramp in lithium mining as well as battery production, particularly with projects in Nevada and Arkansas, it still lags behind other countries in terms of output.
Oil giant Exxon has wasted no time jumping into the fray, announcing in November its first lithium well in Arkansas—a former oil stronghold now seen as rich with lithium potential.
“Lithium is essential to the energy transition,” an Exxon executive declared, positioning the company at the forefront of the electrification wave.
