Lithium market to face transition as demand growth slows
(Posted on 02/02/24)
The lithium market is experiencing a period of transition as demand growth slows and the industry adjusts to changing dynamics, according to Wood Mackenzie’s ‘Lithium: Five things to watch in 2024’ report. While lithium remains a crucial raw material for batteries, its growth rate is decelerating due to a maturing market, subdued electric vehicle (EV) sales, and a declining intensity of use within evolving cathode chemistries.
“Global plug-in EV sales are projected to rise by 33% this year, a significant drop from the average annual growth rate of 71% observed between 2021 and 2023. Lower government incentives and inadequate charging infrastructure are expected to curtail EV sales in 2024. This shift in the EV market will have implications for lithium demand,” says Allan Pedersen, principal analyst for lithium at Wood Mackenzie.
According to Wood Mackenzie, the rise of lithium iron phosphate (LFP) cathode chemistries, which require lower lithium content, is outpacing the growth of high-nickel cathode chemistries. This trend exerts further downward pressure on the rate of lithium demand growth.
In 2023, the lithium market experienced a downward trajectory of prices, signalling a shift towards a supply surplus. This decline was primarily driven by the continuous destocking of inventories, which had a negative impact on prices. Looking ahead to 2024, Wood Mackenzie anticipates that the destocking trend will persist, further influencing the lithium industry.
According to Wood Mackenzie, the higher-cost sectors of the lithium supply chain, particularly the large lepidolite operations in China and direct-shipping-ore (DSO) supplies for processing and refining, are feeling the pinch. However, these sectors are considered marginal producers. The core of the cost curve and potential output reductions warrant closer examination.
Looking beyond supply price analysis, various factors come into play. Single-asset companies cannot halt production without jeopardising their cash flow, leading them to explore alternatives such as high-grading or reducing spending. In contrast, lithium majors with multiple assets can curtail production to restore market balance and maximise long-term asset value. Political pressure may also influence the decision to keep unprofitable assets operational.
“As we move into 2024, we predict that delays and slow project development will be announced as companies seek to preserve cash. Meanwhile, M&A activity may increase as lithium majors look for growth opportunities and mining majors consider entering the lithium space,” Pedersen says.
According to Wood Mackenzie’s analysis, several new resource projects and conversion projects are set to start in 2024. Each project will face unique commissioning challenges, regardless of the company’s experience. Mining companies will face challenges related to the ore body and concentration of the ore, while brine projects will have to contend with the variability of the resource. Refining projects, on the other hand, will need to deal with the precision chemistry required to produce products and quality that meet the supply chain’s needs for rechargeable batteries.
“The lithium market is going through tumultuous times,” says Pedersen. “While demand has nearly tripled in the past three years, reaching around 1 million tons in 2023, the growth rate is expected to moderate. Nevertheless, the industry's fundamentals remain excellent, driven by the global push to decarbonise,” Pedersen adds.
Latest News
American Feed Industry commends vital supply chain legislation
(Posted on 23/04/24)The American Feed Industry Association (AFIA) has commended Representatives Ashley Hinson, R-Iowa-02... Read more
NGFA says NASS reports are critical to agribusiness operations
(Posted on 23/04/24)In a letter to U.S. Agriculture Secretary Tom Vilsack, the National Grain and Feed Association (NGFA... Read more
Bauxite and aluminium businesses deliver stable Rio Tinto results
(Posted on 18/04/24)Bauxite production of 13.4 million tonnes was 11% higher than the first quarter of 2023 for Rio Tinto... Read more
Rio Tinto spends more than A$16.1 billion with Australian suppliers
(Posted on 15/04/24)Rio Tinto increased its spend with suppliers and local businesses in Australia to more than A$16.1 billion... Read more
Cargill increases its renewable energy capacity by more than 40%
(Posted on 15/04/24)Cargill has reported increasing its contracted renewable energy capacity by 42% after signing five new... Read more
Agreement to set up KEZAD steel recycling and production facility
(Posted on 29/03/24)The UAE’s largest operator of integrated and purpose-built economic zones, Khalifa Economic Zones... Read more
Senate legislation includes phosphate and potash as critical minerals
(Posted on 25/03/24)The Fertilizer Institute (TFI) has praised the U.S. Senate for introducing bipartisan legislation to... Read more
Agribusiness expert’s legacy and optimism for GrainCorp’s future
(Posted on 18/03/24)Farmer, Company Director and long-standing member of the GrainCorp Board of Directors, Dan Mangelsdorf... Read more
Research offers Rotterdam guidelines for raw material transition
(Posted on 15/03/24)Different product processes, non-fossil raw materials and rare materials are crucial for a CO2-neutral... Read more
Bunge Chevron Ag Renewables to build Louisiana processing plant
(Posted on 10/03/24)Bunge and Chevron have announced approval of a final investment decision for their joint venture Bunge... Read more
