Solid demand to underpin lithium as price slides in 2018

An oversupply of lithium has nearly halved prices this year in China, halting an unprecedented run for the key component for batteries used in electric vehicles.

But analysts say solid long-term demand should shore up the market after a slight surplus in demand this year.

A boom in electric vehicles has boosted prices for components of lithium-ion batteries including lithium and cobalt, as consumers such as car companies scramble to secure supplies.

But lithium prices have come under pressure in 2018 because miners have ramped up production, consumers destocked supplies and subsidies in China’s new energy vehicles (NEVs) market have been pulled back.

Prices in China, the world’s biggest consumer of lithium, plunged to $13,000 per ton in August from a peak of $24,750 in March, according to prices tracked monthly by Benchmark Mineral Intelligence (BMI).

“There is certainly no shortage of potential supply and there are already a huge number of projects out there,” said Alex Laugharne, principal consultant at CRU.

Although demand will not falter, analysts say, prices for lithium carbonate in China, the type used in batteries, will remain under pressure this year due to oversupply.

Analysts at CRU expect the lithium market to be in surplus by 22,000 tons in 2018, with demand expected to reach 277,000 tons.

Meanwhile, a tightening in credit forced lithium market players in China to destock as they tried to secure cash, further flooding the market with the chemical, analysts said.