Lithium carbonate prices crashed from roughly 306,000 CNY/T in June last year to around 85,000 CNY/T in January 2024. Following this bust, prices have recovered to the present 112,500 CNY/T level. The tepid price recovery, while indicative of prices possibly bottoming out, points to the pressures of oversupply in the sector.
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Interesting Dynamics
Interestingly, some miners are working to expand capacity even as the lower lithium prices impact some projects. As the world’s focus on moving away from fossil fuels grows, demand for batteries and electric vehicles has been on the rise. However, the rapidly changing supply-demand equations have impacted the lithium industry.
This year’s telltale signs of sluggish EV demand mean planning for capacity additions and production can be a challenging task for miners. At the same time, an opposite scenario, one where lithium recovers and then scales new highs, could prove to be a nightmare for EV makers. Such a scenario could mean costlier EV batteries and higher costs of production for EV producers.
No End to Oversupply
For now, though, the lithium industry is still sitting on elevated inventory levels. Meanwhile, Chile, the second largest lithium producer globally, is aiming to double its output over the next decade.
How Much is LIT?
Amid these dynamics, the Global Lithium & Battery Tech ETF (LIT) has declined by nearly 24% over the past year. At around $46, the ETF is hovering at levels last seen in November 2020.
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