Spodumene prices, a crucial raw material in lithium production, have recently plummeted to their lowest levels since August 2021, primarily due to a significant downturn in lithium chemical prices. This sharp decline has put major producers under pressure, creating turbulence in the lithium market.
As of September 4, spodumene FOB (Free on Board) Australia prices have dropped by 14.4% this year, hitting $818 per tonne, according to the Benchmark Lithium Price Assessment. This marks a staggering fall from their peak in December 2022 of $6,401 per tonne—now only one-eighth of their highest value. The decrease is largely attributed to the diminishing prices of lithium chemicals, which spodumene prices closely track. Additionally, high inventory levels are a contributing factor, with spodumene suppliers and producers in China flooding the market to maintain their market share despite the falling prices.
A New Competitor Emerges in the Lithium Race
Spodumene is no longer the sole player in the lithium market. Prices for lepidolite, another lithium-bearing mineral, have also experienced a sharp decline, particularly in China. In August, lepidolite prices dropped significantly, making it a more appealing option for lithium producers. This shift has further reduced the demand for spodumene, hastening its price decline. During the two-week assessment period ending on September 4, spodumene prices saw a 3.3% decrease. The increasing interest in lepidolite as a feedstock, coupled with existing inventory surpluses, continues to paint a bearish outlook for spodumene producers.
Benchmark’s data also highlights notable declines in the spot prices of lithium carbonate and lithium hydroxide in China. Lithium carbonate prices have fallen by 23.8% this year, while lithium hydroxide prices have dropped by 15%. These declines in lithium chemicals mirror the challenges faced by spodumene producers and reflect broader market dynamics.
The current lithium price environment presents a particularly tough challenge for spodumene producers, especially those with higher production costs. As prices approach the $800 per tonne threshold, many higher-cost producers are finding it increasingly difficult to maintain profitability. Some are being compelled to make difficult decisions, such as curtailing production or postponing expansion projects. Adam Megginson, a senior analyst at Benchmark, elucidated, “As we have approached the $800 a tonne mark, we have started to hear lower bids, but they have not closed. So, we’re beginning to see resistance at these levels.” Producers are in a dilemma: announcing production cuts could signal to the market that they are struggling to cope with the price environment. Nevertheless, many lithium producers are keen to continue operating to be prepared to seize market share once prices rebound. This means that some upstream players persist in production even when prices dip below their operational costs. For instance, Arcadium Lithium recently announced plans to place its Mt Cattlin mine into care and maintenance by 2025 due to the low-price environment.
However, Greenbushes, a significant spodumene producer, seems to be weathering the storm. Its expansion, anticipated to ramp up to 60,000 tonnes per year of lithium carbonate equivalent (LCE), is still on track to go online next year. In contrast, projects in Africa, predominantly owned by Chinese companies, have continued without interruption, driven by vertical integration within the Chinese market.
Sophia Jang, an analyst at Benchmark, pointed out that any price hikes this year are unlikely to be substantial. Nevertheless, she suggested a potential short-term spike in prices towards the end of September as Chinese cathode producers seek to secure materials ahead of China’s National Day Golden Week on October 1. Looking further ahead, the fourth quarter typically witnesses heightened demand for electric vehicles, which could help stabilize the demand for lithium. However, it remains uncertain whether this will suffice to drive a meaningful recovery in spodumene prices.
While the lithium market is currently experiencing short-term turbulence, the long-term outlook remains optimistic. Benchmark’s Lithium-ion Battery Database projects that a minimum of $1.6 trillion in investment will be required to meet battery demand by 2040. This figure is nearly triple the $571 billion needed to meet demand by 2030. Battery demand is anticipated to witness significant growth in the coming years, from 937 gigawatt-hours (GWh) in 2023 to 3.7 terawatt-hours (TWh) in 2030. This demand is expected to double again between 2030 and 2040, underscoring the substantial need for new investment in lithium production, processing, and battery manufacturing.
A significant portion of this investment—44%—will be allocated to constructing gigafactories, which will manufacture battery cells and assemble battery packs. Recycling will also play a pivotal role in meeting future lithium demand. As more electric vehicles reach the end of their useful life, the battery scrap pool is poised to expand significantly. Benchmark estimates that $26 billion will be necessary by 2030 to establish the capacity to recycle this scrap into usable battery materials. By 2040, this figure is projected to rise to $157 billion.
Among critical raw materials, lithium will necessitate the most substantial investment to meet future demand. By 2030, $94 billion is needed to scale up lithium production, with this figure doubling by 2040. Despite the current challenges in the lithium market, the long-term trajectory remains positive, predominantly driven by the growth of electric vehicles and renewable energy storage. While spodumene producers may be navigating choppy waters presently, those who can withstand the storm are likely to reap the rewards of future demand growth.
