Spodumene Prices Plunge 87%, But a $1.6 Trillion Lithium ...

Spodumene prices, a crucial component in lithium production, have plummeted to their lowest levels since August, driven by a sharp decrease in lithium chemical prices. Amidst this, the lithium market faces significant challenges, putting major producers under pressure.

As of September 4, spodumene FOB (Free on Board) Australia prices fell by 14.4% this year, reaching $818 per tonne, according to the Benchmark Lithium Price Assessment. This marks a staggering fall from their peak of $6,401 per tonne in December, illustrating a decline that brings prices down to one-eighth of their highest value.

The substantial drop is largely linked to the declining prices of lithium chemicals, which tend to influence spodumene prices closely. In addition to falling lithium prices, high inventory levels have been exacerbating the situation. Suppliers and producers of spodumene in China persist in flooding the market to hold their market share, further contributing to the decline.

A New Competitor Emerges in the Lithium Race

Spodumene is no longer the sole player in the lithium market. Prices for lepidolite, another mineral containing lithium, have also seen sharp declines, particularly in China. In August, lepidolite prices dropped significantly, making it a more appealing option for lithium producers, which has subsequently decreased the demand for spodumene and accelerated its price decline.

During the two-week assessment ending on September 4, spodumene prices saw a further 3.3% drop. The rising interest in lepidolite, combined with existing inventory surpluses, contributes to a bearish outlook for spodumene producers. According to Benchmark’s data, there have also been steep declines in spot prices for lithium carbonate and lithium hydroxide in China, with lithium carbonate prices falling by 23.8% this year and lithium hydroxide prices by 15%. This trend mirrors the difficulties faced by spodumene producers and reflects broader trends in the market.

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Producers on the Ropes: The Pain of Falling Prices

The current pricing environment for lithium is causing significant distress among spodumene producers, particularly those with higher production costs. As prices near the $800 per tonne threshold, many of these producers are struggling to remain profitable. Some are faced with difficult decisions regarding cutting production or delaying expansion projects.

According to Adam Megginson, a senior analyst at Benchmark, as prices approach the $800 a tonne level, there has been a noticeable trend towards lower bids, though agreements have not yet been finalized. “As we approach $800 a tonne, we’re witnessing resistance at these levels,” he stated.

Producers are in a challenging position: announcing production cuts could signal distress in the market. However, many lithium producers wish to maintain operations to capitalize on market share when prices rebound. Consequently, some upstream players are continuing to produce even when prices fall below their operational costs.

• RELATED: Lithium Prices Hit New Lows: Can the Market Survive the EV Slowdown and Price Plunge?

For example, Arcadium Lithium recently declared its plan to place its Mt Cattlin mine into care and maintenance due to current low prices. Conversely, Greenbushes, a major spodumene producer, seems to be enduring the challenges as it is on track to ramp up its expansion to 60,000 tonnes per year of lithium carbonate equivalent (LCE) by next year. Projects in Africa, largely owned by Chinese companies, continue operations unabated due to vertical integration within the Chinese market.

More Clouds Before the Storm Clears

Sophia Jang, an analyst at Benchmark, indicated that any notable price increases in the near future appear unlikely. However, she noted there may be a temporary spike in prices towards the end of September as Chinese cathode producers aim to secure materials ahead of China’s National Day celebrations on October 1.

Historically, the fourth quarter sees an uptick in electric vehicle demand, which could stabilize the demand for lithium. Nonetheless, it remains uncertain if this will lead to a significant recovery in spodumene prices.

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The Long Game: $1.6 Trillion Needed to Meet Future Demand

Despite the current turbulence in the lithium market, the long-term outlook remains optimistic. According to Benchmark’s Lithium-ion Battery Database, an estimated $1.6 trillion investment will be necessary to satisfy battery demands by 2030. This investment need is nearly threefold compared to the $571 billion required to meet demand by 2025.

Battery demand is projected to increase significantly over the coming years, soaring from 937 gigawatt-hours (GWh) in 2020 to 3.7 terawatt-hours (TWh) by 2030, with demand expected to double again between 2030 and 2040, underscoring the substantial need for new investments in lithium production, processing, and battery manufacturing.

• A considerable portion of this investment—44%—will focus on creating gigafactories for battery cell production and assembly.

Recycling will also play an essential role in addressing future lithium demand. With more electric vehicles at the end of their life cycle, the pool of battery scrap is on course to grow considerably. According to Benchmark, $26 billion will be needed by 2030 to establish the capacity necessary to recycle this scrap into useful battery materials. By 2040, this number is anticipated to rise to $157 billion.

• READ MORE: Global Lithium and Battery Trends: Top Stories You Need to Know!

Lithium Takes the Lead

When considering critical raw materials, lithium demands the largest investment to meet future requirements. By 2030, approximately $94 billion is needed to scale lithium production, a figure that is expected to double by 2040. While the current market may face numerous challenges, the long-term trajectory for lithium remains predominantly positive, primarily driven by the growth of electric vehicles and renewable energy storage. Although spodumene producers are currently facing difficult conditions, those who withstand these challenges are poised to benefit from the anticipated demand growth in the future.