In 2022, lithium has become a very expensive element, even called white gold. And its value in November of last year was $86,910 per ton. Since the beginning of 2023, the value is falling and the Chinese are sinking into despair. On the other hand… electric cars could get even cheaper!
After the mad rush for lithium comes the heavy hangover
The craze for China's lithium mines has become so frenzied that in February the government had to send a group of officials to Yichum, an area rich in lithium deposits, to restore order to the sector. The reason was the most troubling: the locals were already digging into the mountains to collect lepidolite. And it was circulated among the people that whoever found this mineral got more in two days of work than what he got in a full month of work.
After ordering, other problems arose. At the beginning of the month, many mining companies in the region, China's "lithium capital", halted their production. They can no longer pay their bills.
The reason: the drop in the price of "white gold".
The locals were already digging into the mountains to collect lepidolite. They earn more in two days than they earn in a month of work.
Prices are going down
Data recently published by Bloomberg show that after a continuous rise for two years, which He raised the price to 597,500 yuan (86,910 US dollars) per ton in NovemberThe value of lithium is now falling helplessly in China.
The current value of a ton is about 187,500 yuan ($27,300). The Asian charts for the metal clearly show the rise and subsequent fall of the lithium carbonate curve.
To get an idea of the scenario in this market, in March, EFE already echoed the table: after doubling its price during 2022, lithium was on a downtrend in the Chinese market, with Almost 30% loss in just three months. On February 21, the price of lithium carbonate has already reached 425,000 yuan (61,128 US dollars), far from the record set in November.
The numbers were and are, in any case, higher than those of 2021, when, according to the Global Times, a ton cost less than 100,000 yuan ($14,392). Last week, the Nikkei noted that the price of lithium carbonate had fallen below the psychological threshold of 200,000 yuan.
From lithium fever to dead end
The situation in Yichun, China's so-called "lithium capital", is very complicated. At least two of its four largest miners said they had suspended production because the sharp drop in prices made it difficult for them to cover costs.
What is the reason for the fall? Not one reason, but several. One of the main ones is related to the extension The slowdown in the electric vehicle market in Chinathe same that drove the mining boom: in 2022, the year in which the price of "white gold" soared, the production of lithium-ion batteries increased by 130%, according to official data from the Asian giant.
a End of subsidy for NEV purchases In China, an ambitious subsidy program that ended after 13 years had a huge impact on demand. The data for the beginning of 2023 speak for themselves: NEV sales, which include plug-in hybrid and electric vehicles, fell 6.3%. in January compared to the same month in 2022 and 50% compared to December. The latest data point, however, is to rebound in February, with electric sales picking up.
In 2021, the price of lithium per ton was 14,392 USD. In 2022 the value has increased to $86,910. It is currently at $27,300.
In addition to the impact of ending subsidies, analysts point to other factors that could explain the decline in the price of lithium, such as companies using their inventories to avoid rising costs or the possibility of another oversupply.
Reuters even points to the impact of the discounts CATL offers to manufacturers. The peak of the price of lithium hydroxide is also felt on the London market.
We see a lot of supply coming from the lithium mines... We expect lithium supply to grow 38% this year. Therefore, 2023 is likely to be a year of excess for lithium.
Bank of America's Mattie Chow told CNBC in March.
But there are those who point to a different reason: a A "false narrative" deliberately pursued by China Focusing on prices in light of the scarcity of supply.
And what about the future?
Well, here's where the prediction gets trickier. This is because the market has this uncertainty: What are the prospects for the future and how will prices develop?
According to Huaan Securities Co, an analyst at Bloomberg, Inventories in the supply chain are already at a low level And with increased demand in the second quarter, lithium prices could stop falling and stabilize.
Therefore, this ton price can be stable and stop falling. However, in recent months, due to price volatility, low supply and high demand, major auto manufacturers have been looking for ways to guarantee their supply, carry out long-term deals or even invest directly in mining operations.
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