Home Commodities The U.S. sold 1.2 million EVs last year. Why are lithium prices...

The U.S. sold 1.2 million EVs last year. Why are lithium prices down almost 40%?


Not long ago, lithium prices were skyrocketing on fears of a supply shortfall, as growth in the electric-vehicle market lifted demand for the metal used in lithium-ion rechargeable batteries.

The tables have turned.

The average annual price for battery-grade lithium carbonate fell to $41,166 per metric ton in 2023, down nearly 40% from $68,075 in 2022, according to data from Benchmark Mineral Intelligence. Prices had dropped on a quarter-to-quarter basis, down about 38% in the fourth quarter.

Electric vehicle, or EV, sales in China hit a record, but fell short of forecasts, which hurt lithium demand expectations, said analysts at Benchmark Mineral Intelligence, led by Principal Analyst Federico Gay.

China’s passenger EV sales growth slowed to 28% in third quarter of last year, from 108% in the same period a year earlier, Fitch Ratings reported, citing data from the China Association of Automobile Manufacturers.

“China is the world’s largest EV market and [it] saw a considerable drop in the rate of growth of EV adoption,” said Steve Schoffstall, director of ETF product management at Sprott Asset Management.

Worrisome signs

Worrisome signs in the market pointing to a slowdown in demand growth for electric vehicles spanned beyond China.

Globally, the proportion of consumers in key auto markets open to purchasing an EV dropped to 67% last year, from 71% in 2022 and 86% in 2021, according to an analysis by S&P Global Commodity Insights and S&P Global Mobility released this month.

“Higher interest rates are weighing on the automotive sector as the cost to purchase a car has increased considerably, and EVs have not been immune,” said Schoffstall. “Higher costs of living and economic uncertainty” are also likely weighing on the auto industry as buyers put off making large purchases.

In October, Ford Motor Co.


reported an adjusted loss of $1.3 billion for its EV unit, attributed to “continued investment in next-generation EVs and challenging market dynamics.” It said customers interested in EVs are “unwilling” to pay the vehicles’ premium prices.

To be clear, EV sales are not falling, said Austin Devaney, chief commercial officer of Piedmont Lithium Inc.



told MarketWatch. He said the EV market continues to grow, with “the rate of growth slowing from ‘tremendous’ to ‘excellent’.”

Last year, a record 1.2 million electric vehicles were sold in the U.S., according to estimates from Kelley Blue Book, a Cox Automotive company, with the EV share of the total domestic vehicle market at 7.6%, up from 5.9% in 2022.

The overall industry picture “remains bright with record EV sales, new companies, expanded vehicle offerings, and a growing charging infrastructure,” said Devaney.

Not only are EV sales growing but the size of the batteries within the vehicles is growing, as drivers want longer range, he said. That’s led to a nearly 50% increase in gigawatt hours (GWh) deployed, which includes significant growth in the energy storage sector, which is now about 15% of battery demand and “growing rapidly.”

“This is still a nascent industry, experiencing amazing innovation and growth but also some growing pains,” he said, with some of the auto companies, for example, realizing that the products they were offering weren’t competitive in the market.

Lithium supply and prices

For now, lithium supplies may outpace demand, some analysts said.

Supply-wise, there have been several developments in regard to the available supply of lithium, “given the ramp up and commissioning of considerable new capacity globally,” Benchmark Mineral’s Gay told MarketWatch.

He specifically mentioned an agreement between Chilean state-owned mining company Codelco and Sociedad Quimica y Minera de Chile


one of the world’s largest lithium producers, as one of the major supply-side policy developments. The companies in late December said they planned to form a partnership to jointly develop lithium in the Salar de Atacama, the largest salt flat in Chile.

S&P Global Commodity Insights expects the supply of lithium to top demand over the next few years, partly due to the supply response to the much higher prices seen in 2021 to 2022.

See archived story: Lithium supply may tighten in the years ahead, driving prices higher along with it (Sept. 20)

It said spot lithium carbonate prices climbed by more than 500% between June 2021 and December 2022 before falling about 70% by October 2023.

Following a drop in lithium prices over the past year as supply outpaced demand, Albemarle Corp.


among the world’s biggest lithium miners, announced job cuts Wednesday as part of its efforts to reduce costs. Shares of Albemarle lost 33% in 2023.

“There was an excessive stocking of [lithium] inventory throughout the supply chain in late 2022 and early 2023, and some of that…resulted in a supply-demand imbalance, which led to lower prices in 2023,” said Devaney.

Even so, there are expectations that demand will outstrip supply in the latter half of this decade, he said.

Over the past two years, more than $80 billion worth of battery manufacturing projects or expansions have been announced, said Devaney. Those projects would require “roughly 40 times the amount of current lithium hydroxide capacity in the U.S. to fulfill demand domestically — and the capacity from currently planned raw material production projects…doesn’t come near that mark.”

Sprott’s Schoffstall said that governments are supportive of efforts to build EV battery supply chains and Sprott expects that trend to continue.

So while there may be a “slowdown in growth of EV adoptions, Sprott anticipates considerable growth over the longer term,” he said.

“Lithium supply is expected to outstrip demand through 2026, after which point demand may moderately outpace supply through the end of the decade,” said Schoffstall. Then as government and self-imposed manufacturer mandates approach, mostly by 2035, Sprott expects to see a “considerable supply deficit emerge.”

The energy transition and move to cleaner energy sources, including EVs, is a multidecade shift in the way we produce and consumer energy,” he said. “Though there may be bumps in the road, investors with a long-term view may benefit from growth potential and diversification offered by lithium miners.”

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