A few of Q3’s worth stability got here as lithium producers scaled again output and expenditures to counter slower demand development, significantly from the electrical car (EV) sector, which is the first driver of lithium demand.
Their response additionally benefited different segments of the lithium market.
“Chemical costs remained pretty steady over the quarter, ticking down barely,” Sophia Jang, an analyst at Benchmark Mineral Intelligence, defined by e-mail to the Investing Information Community (INN).
“Costs for lithium carbonate in China remained at a premium to hydroxide in a mirrored image of the rising regional desire for LFP cathode chemistries over high-nickel NCM. Nonetheless, this hole remained slender.”
Whereas chemical costs remained near equal, spodumene costs fell. Jang stated this was a delayed response to the decline in chemical costs, as most spodumene pricing contracts reference the chemical spot market.
The lower in spodumene costs was additionally talked about in a July worth evaluation from S&P World Commodity Insights. It notes that spodumene has registered a steep worth decline since peaking throughout This autumn 2022.
In accordance with Platts knowledge, spodumene with 6 p.c lithium oxide content material was assessed at US$950 per metric ton on July 15, FOB Australia foundation. That is down US$7,250, or 88 p.c, from its peak on November 18, 2022.
“Spodumene costs over the previous one-and-a-half years have confronted extreme downward pressures from a hunch in lithium chemical costs and demand that has wavered on weaker-than-expected world EV output and gross sales figures,” wrote Leah Chen, group lead, battery metals pricing, at S&P World Platts, in a July e-mail to INN.
Lithium provide and demand tendencies in Q3
Market oversupply, subdued spot market exercise and a shift in most well-liked battery chemistries emerged as probably the most prevalent tendencies impacting the lithium market between July and the top of September.
“Q3 has been a quiet quarter on the spot market. The vast majority of demand from midstream customers of lithium chemical substances was happy by volumes delivered below contract,” Jang commented. “Cathode producers secured restricted additional materials on the spot market, adjusting this in accordance with their demand.”
Costs additionally confronted headwinds from a provide imbalance. “Inventories of chemical substances in China remained excessive, which didn’t assist costs. A number of lithium producers, particularly these increased up the associated fee curve that have been producing from exhausting rock, diminished or stopped manufacturing as a result of deteriorating worth surroundings,” she added.
On the battery aspect, the once-dominant NCM chemistry misplaced a few of its market share to the lithium-rich LFP design.
“LFP demand development proved stronger than NCM, leading to elevated LFP manufacturing, with some cathode producers endeavor the roughly 9 month technique of switching a portion of their capability from NCM to LFP,” stated Jang.
EV gross sales climb as market recovers
Though US EV gross sales figures for 2024 have are available under projections, the broader EV sector made giant features in September when world gross sales tallies topped 1.7 million items, setting a brand new month-to-month file.
In accordance with knowledge from Rho Movement, the banner month for EV gross sales represents a 22 p.c year-to-date enhance. Regionally, the Chinese language market noticed probably the most important enhance, with 1.1 million new EVs bought.
“This record-breaking month of EV gross sales brings new hope to the business,” stated Charles Lester, knowledge supervisor at Rho Movement, in a mid-October article. He went on to notice, “Whereas the electrification of transport appears inevitable, the latest slowdown of gross sales in lots of elements of the world has sewn seeds of doubt which may now begin to be swept apart. Nonetheless, the regional disparities are astonishing, with China alone accounting for nicely over half the worldwide whole, in the meantime Europe’s numbers are shrinking, and the US and Canada are steadily rising.”
One other end-use phase that noticed demand development in Q3 was the power storage system (ESS) sector. Jang famous that it grew steadily at the same time as downstream EV gross sales development continued to range broadly between totally different areas.
“We noticed this significantly in North America, the place it triggered ESS market individuals to safe carbonate forward of the presidential election in November, fearing tariff will increase following both election end result,” she stated.
Tariffs incentivizing North American EV manufacturing
Because the third largest producer of lithium and the chief in battery and EV manufacturing, China’s dominance in these markets has led the US, EU and Canada to implement steep tariffs on Chinese language EVs.
Most just lately, Canada levied a 100% tariff on EV imports from the nation, citing “unfair” commerce insurance policies. China responded shortly by submitting a criticism with the World Commerce Group over the 100% EV tariffs, in addition to Canada’s 25 p.c tariffs on aluminum and metal merchandise from the Asian nation.
Though the EV tariffs are supposed to defend Canadian automakers and the sector, they do little to deal with the nation’s supremacy in battery manufacturing, nor do they incentivize regional lithium manufacturing.
“Tariffs on uncooked materials imports are prone to be extra impactful in spurring regional lithium manufacturing than tariffs on EV imports. However home automakers have a tendency to not be too keen on this because it raises their price of manufacturing. Home automakers are extra involved in EV import tariffs in fact, however the impression of this on regional lithium manufacturing is much less direct,” famous Adam Megginson, an analyst at Benchmark Mineral Intelligence
Within the US, tariffs on Chinese language lithium-ion batteries for EVs are set to leap from 7.5 p.c to 25 p.c in 2025, whereas tariffs on EV imports will climb to 100%. Nonetheless, even because the Biden administration hikes taxes on Chinese language EVs, it’s providing assist to the home auto sector.
“We’ve seen sturdy funding assist on the federal stage, with a second spherical of grants from the US Division of Vitality unveiled focused at battery uncooked supplies initiatives,” stated Megginson.
The analyst went on to notice that SWA Lithium, a three way partnership firm owned by Canada’s Normal Lithium (TSXV:SLI,NYSEAMERICAN:SLI) and Norwegian power firm Equinor (NYSE:EQNR), acquired a US$225 million grant from the US for the development of Section 1 of the South West Arkansas venture.
The Division of Vitality’s Workplace of Manufacturing and Vitality Provide Chains, which oversees the funding, additionally awarded a grant to a different US-based firm. “American lithium venture developer TerraVolta was chosen by the (Division of Vitality) to obtain a US$225 million grant for its Liberty Owl venture, situated in Texarkana, Texas. TerraVolta plans to begin development in 2028, with manufacturing the next 12 months,” stated Megginson.
Lithium initiatives within the pipeline
Though the lithium market remained depressed and nicely equipped throughout the third quarter, Benchmark Mineral Intelligence is forecasting a provide scarcity beginning as early as 2025.
Whereas there are at present 101 lithium mines globally, future provide might battle to satisfy rising demand, significantly with China anticipated to drive a 20 p.c annual enhance over the subsequent decade.
Low lithium costs have already led to diminished venture investments and capital expenditures. Nonetheless, as Jang identified, a number of important investments in future provide have been made throughout the third quarter.
“In July 2024, European Lithium (ASX:EUR,OTCQB:EUEMF) and Obeikan Group signed a 50/50 three way partnership settlement to collectively develop the development and operation of a lithium hydroxide facility in Saudi Arabia,” she stated.
The Benchmark Mineral Intelligence analyst additionally famous that the EU signed a framework settlement on essential uncooked supplies provide with the Republic of Serbia in July.
In fact, there have been additionally challenges within the quarter. July noticed Rio Tinto’s(ASX:RIO,NYSE:RIO,LSE:RIO) plans to advance the Jadar lithium venture in Serbia met with opposition. Protestors have been demanding that the nation’s authorities revoke permission for the proposed mine and implement a lithium-mining ban.
An October 7 parliamentary vote in Serbia did not enact such a ban.
Jang additionally outlined different notable growth information from the quarter, together with Ganfeng Lithium’s (OTC Pink:GENF,SZSE:002460,HKEX:1772) August funding in Lithium Argentina’s (TSXV:LIT,OTCQX:LILIF,FSE:OAY3) Pastos Grandes lithium brine venture in Salta, Argentina, marking a major growth in its South American operations.
Additionally in August, E3 Lithium (TSXV:ETL,OTCQX:EEMMF) entered a joint growth settlement with Pure Lithium to discover the design of a lithium steel anode and battery pilot plant in Alberta, Canada.
“In September 2024, Ganfeng Lithium introduced a RMB 500 million (US$70.5 million) funding to spice up cathode manufacturing at its mica mine and processing venture in Inside Mongolia,” she stated.
“Moreover, SQM Australia (NYSE:SQM) partnered with Andrada Mining (LSE:ATM,OTCQB:ATMTF) in September to collectively develop the Lithium Ridge asset in Namibia.”
Persevering with this pattern, Rio Tinto introduced plans to spend US$6.7 billion to accumulate US-based Arcadium Lithium (NYSE:ALTM,ASX:LTM) in early October.
Lithium tendencies to look at as 2024 continues
If the lithium market has certainly bottomed, there could also be alternatives for these with the suitable threat urge for food.
In accordance with a late July report from Sprott, whereas the long-term outlook for lithium miners stays optimistic resulting from rising demand, many producers have skilled important share worth drops all through 2024.
The agency believes that given lithium’s demand outlook, these shares could possibly be nicely positioned for future development. For traders, this might imply an opportunity to put money into lithium miners at decrease costs in comparison with 2023.
On a special notice, Megginson inspired traders to look at the US election shifting ahead.
“All eyes will probably be on the US election to see whether or not a Trump presidency brings about important structural adjustments to the (Inflation Discount Act), or a Harris presidency strengthens this coverage assist image,” he stated.
“We sometimes count on demand for lithium chemical substances to be highest heading into This autumn, because it tends to be the strongest quarter for EV gross sales. On condition that feedstock provide upstream stays pretty sturdy, and chemical substances provide within the midstream stays sturdy, we might not see a lot motion in costs to the top of the 12 months,” added Megginson.
Looking forward to 2025, the analyst stated he expects to see extra market consolidation if costs stay rangebound. This might additionally result in firms searching for merger and acquisition alternatives.
“In 2025, will probably be attention-grabbing to see which initiatives are pressured to pause or halt manufacturing as a result of worth stage difficult their economics,” he stated. “Lastly, we will probably be watching lithium venture developments in Africa intently, as a number of firms are actively creating capability within the continent, significantly in Zimbabwe and Namibia.”
Megginson added, “Ought to this new hard-rock provide come on-line, and at a ample grade high quality and consistency, it might pose a problem to incumbent producers who sit increased up on the associated fee curve.”
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Securities Disclosure: I, Georgia Williams, maintain no direct funding curiosity in any firm talked about on this article.
Editorial Disclosure: The Investing Information Community doesn’t assure the accuracy or thoroughness of the data reported within the interviews it conducts. The opinions expressed in these interviews don’t replicate the opinions of the Investing Information Community and don’t represent funding recommendation. All readers are inspired to carry out their very own due diligence.
