The global electric vehicle (EV) industry is navigating a tumultuous period in 2024, significantly affecting lithium demand, according to a report from Skillings Mining Review. After years of robust expansion, the EV market's growth trajectory has shifted, particularly in the Americas and Europe, which has encountered substantial declines.
Despite buoyant sales in the Asia-Pacific region, which is primarily driven by China, the overall growth in EV sales has noticeably faltered. The report highlights that EVs have now surpassed traditional vehicle sales in China, accounting for more than half of the market. This trend is anticipated to continue, bolstered by Beijing’s economic stimulus initiatives aimed at promoting the adoption of cleaner energy vehicles.
In stark contrast, the Americas have witnessed a slowdown, while Europe is grappling with a decline in EV sales. Uncertainty looms over the European market due to trade restrictions imposed by the European Union on Chinese-manufactured vehicles, alongside potential tariffs from a new U.S. administration and the rollback of climate policies. Nevertheless, the implementation of stricter CO2 regulations in Europe set to commence in 2025 may compel automakers to enhance their EV offerings at competitive prices.
Tesla, a leading entity in the EV landscape, is reportedly preparing to augment its production capacity by introducing 500,000 new units in 2025, featuring a new low-cost passenger model and an eagerly awaited robotaxi. The downward trend in battery material costs is expected to further stimulate demand across various regions, indicating a complex interplay of factors that will shape the industry moving forward.
The dynamics of lithium battery chemistry are also evolving. The report notes a marked increase in the adoption of lithium-iron-phosphate (LFP) batteries, which are free of nickel and cobalt, surpassing the conventional nickel-cobalt-manganese (NCM) batteries. This development favours the use of lithium carbonate over lithium hydroxide, although regional preferences are varied. Beyond the automotive sector, a surge in demand for lithium in energy storage systems is projected, with such systems anticipated to constitute 13% of overall lithium demand by 2025.
Challenges within the lithium supply chain have become pronounced in 2024, with overproduction leading to significant price drops, factored at approximately 80% from previous peaks. High-cost producers in regions such as China and Australia have encountered substantial viability issues, resulting in operational downturns. In a significant shift, production of lepidolite in China has decreased sharply, with expectations for further reductions in 2025.
Projects from African lithium producers, particularly in Zimbabwe, have been marred by inefficiency and cost tribulations stemming from accelerated development during a prior price surge. Concurrently, operations at several mines, including Sinomine’s Bikita mine, face uncertain futures as the market struggles to regain stability.
The report forecasts a modest recovery in lithium prices in 2025. The doubling of lithium chemical inventories in China throughout 2024 has pressured market prices, though a reduction in high-cost production could normalise inventory levels by mid-2025. Although a surplus of approximately 115,000 tonnes of lithium carbonate equivalent (LCE) is expected, it is likely that prices will stabilise around current market rates, which hover between $10 and $11 per kilogram.
Production predictions suggest that new ventures, such as Liontown Resources’ Kathleen Valley in Australia and Ganfeng’s Goulamina in Mali, will significantly contribute to output in the coming year. However, continued subdued prices may impede the viability of high-cost operations, compelling further cutbacks in production. The reactivation of idle capacities in Australia, China, and Zimbabwe hinges on a stabilized pricing environment, estimated at $15,000 to $20,000 per tonne of lithium carbonate.
Overall, the lithium market is expected to find a semblance of equilibrium by 2025, driven by a combination of production adjustments, postponements in new development projects, and the strategic accumulation of resources to counterbalance the challenges presented by fluctuating demand and supply dynamics. Strong anticipated growth in demand from both the EV and energy storage sectors is poised to facilitate this recovery, ultimately leading to a more balanced outlook for the industry.
Source: Noah Wire Services