Chinese lithium prices fell more than 30% compared to the maximum reached last year. In this context, Goldman warned that the decline will be even greater.
China’s lithium demand plummeted since December after the elimination of subsidies for electric vehicles, boosted by the Covid-19 pandemic that slowed down the supply chain of the automotive industry.
On the contrary, lithium production remains strongwhich causes a mismatch between supply and demand that once again shifts the power of setting prices to consumers.
Prices could be supported by the reopening of the Chinese economy, but a persistent increase in supply towards the end of the year will add pressure on prices leading to lithium carbonate at a value of US$34,000 a ton in the next 12 months. The figure is almost half the spot prices of $61,850 a tonne traded by Asian Metal Inc.
“We hope that the expansion of the lithium supply in china be higher and faster than consensus expectations,” the analysts wrote. “While the recovery in EV sales in the second and third quarters of the year could temporarily lift sentiment and support falling battery metal prices, the probable increase in supply and excess capacity in the later phases will drive down lithium prices in the medium term,” noted in the report.
The fall in lithium prices accelerated after last week after Reuters reported that CATL, the world’s largest battery manufacturerbegan to offer discounts to Chinese electric vehicle manufacturers and is negotiating with suppliers of raw materials to reduce its own prices.
The Shares of lithium miners and battery makers have also tumbled, while heAnalysts warn the move could trigger a price war in the energy storage sector.
Manufacturers find relief in falling prices, although they are still three times above the 2021 average. This adds to the recent decline in other metals needed for battery manufacturing such as nickel and cobalt.
Even so, there are still many bulls in the industry They warn that further difficulties could arise if lithium suppliers fail to meet their ambitious production plans in full.
Goldman Sachs itself warned of an increase in electric car sales that will account for half of new car sales by 2025.
Source: Ambito
