The lithium market is expected to remain in surplus for the next few years, moving to a supply deficit by 2029 after reaching an inflection point in 2028, according to analysts at Scotia Capital.

However, they warn that supply could tighten earlier than projected as producers are responding to low prices, driven by slowing electric vehicle growth globally and oversupply in China. Current battery-grade lithium carbonate is trading at around $8,500/tonne of lithium carbonate equivalent (LCE) in China, a level last seen in February 2021 and a sharp decline compared to the 2023 average price of $38,500/t.

With the spot spodumene concentrate price at $635/t, analysts estimate that “many hard-rock miners are in the red” and, while many mines can survive at this price, “few will flourish.” Most new projects require prices around $1,200/t to be incentivised, according to Scotia Capital.

Indeed, several companies are delaying or cancelling plans: US group Albemarle deferred spending on a domestic lithium refinery, cutting costs and jobs; China’s CATL is reported to have suspended operations at the Jianxiawo mine; and South Korean giant Posco delayed projects in Argentina. In Australia, both Arcadium and Pilbara put projects into care and maintenance, Kallanish learns. 

“Over time, perceived supply shortages could bring prices back toward the $20,000/t LCE incentive price level – at least long enough to kick-start a positive supply response,” says analyst Ben Isaacson. “It’s been fascinating to review two years of market research, where the world’s brightest minds in ‘23 were convinced $25,000/t LCE was the floor... then $20,000, $15,000, $12,000, $10,000, and now we’re at $8,500. But, surely this time it must really be the floor, right? Perhaps.”