Lithium stockpiles are growing and prices are tumbling, as new Australian mines open while Chinese electric car sales stall.
Prices have tumbled more than 40% over the past year to $9.25 a kilogram of lithium carbonate equivalent at the end of July, and will probably remain in the single-digits for a “sustained” period, according to a report from commodity research group CRU.
Six new lithium mines have recently opened in Australia, the world’s biggest producer of the mineral. Adding to the glut is Chile, the second-biggest lithium producer, which is seeking to double its output within four years.
Rising sales of electric-vehicle batteries, which require lithium, has boosted demand. But the industry hit a speed bump in July when Chinese sales of new energy vehicles, a category that includes both electric and hybrids, tumbled for the first time in two years after subsidies were cut.
Shares in the biggest lithium producers, Albemarle Corp., Sociedad Química y Minera de Chile S.A., Livent Corp. and Lithium Americas Corp. have slumped as a result of the glut. Companies are starting to adjust, with Albemarle announcing a delay to a plant expansion in Australia this month.
Albemarle’s CEO Luke Kissam said in a post-earnings call that caution in the energy storage value chain was sparked by oversupply, China and other reasons.
The world’s largest battery companies still want to secure future supplies to meet demand from carmakers as they roll out new electric models, especially in Europe. China’s Tianqi Lithium Corp., said last week that its Australian subsidiary had signed a three-year deal to supply lithium hydroxide to South Korean battery company LG Chem.
South Korean lithium-ion battery manufacturer Samsung SDI said it expects demand for its products accelerating in the second-half of the year as automakers gear up to introduce new electric vehicles and domestic sales of energy storage systems rebound, Argus News reported on July 31.
The lithium producers that survive the short-term glut may be well-placed to reap a windfall. Bloomberg New Energy Finance’s Electric Vehicle Outlook 2019, released in May projected that electrics will make up to 57% of the global passenger car sales by 2040, slightly more than was forecast a year earlier. Electric buses are predicted to make up 81% of municipal bus sales by the same date. Bloomberg projections show electric models taking 56% of light commercial vehicle sales in Europe, the U.S. and China within the next two decades.
Investors looking for quick returns in the lithium sector are hurting because of the surge in supply. Plans for an expansion of the electric vehicle fleet are still on track, so a patient investor might receive a windfall in the not-to-distant future.