With current lithium prices hovering near a three-year low and short-term market sentiment remaining sluggish, market attention is gradually shifting from end-user demand to whether upstream suppliers will proactively reduce the production and supply of lithium salts and lithium ores.
Since the end of 2022, the prices of lithium carbonate and lithium hydroxide have plummeted by about 80%, and short-term market demand remains relatively calm. Most downstream manufacturers only restock as needed and make a few speculative buys at lower prices. Although some smaller miners have announced production halts and cuts, the main concern remains whether large enterprises will choose to halt production and delay the launch of new projects in Australia, Chile, and Argentina.
As various domestic and international listed companies release their Q2 2024 financial reports, the coming weeks may provide clearer insights into the future plans of leading enterprises. Australia's top miner, Pilbara Minerals, reported increased production and shipment volumes of spodumene concentrate in Q2 but decreased costs. Pilbara's financial report has provided new insights and expectations for the future cost center of lithium salt prices in the domestic market, impacting both spot and futures prices on that day. Subsequent reports from Mineral Resources, Albemarle, and Arcadium Lithium may offer more clues about future plans.
Currently, the prolonged low lithium prices may trigger a new round of mine supply cuts and project delays. According to the SMM spodumene concentrate index, the recent price of spodumene CIF China has seen a significant decline, mainly due to the rapid drop in domestic lithium carbonate prices from June to July and the continued decrease in intended purchase prices by domestic lithium ore buyers. As of July 26, the price of spodumene concentrate has approached the lowest levels seen in mid-January to February this year.
Due to the global slowdown in electric vehicle growth and increased upstream raw material supply, the lithium market remains sluggish. This price situation has already impacted some upstream suppliers. Australia's Core Lithium announced this month that it would suspend operations at the Finniss project. Domestically, Zhicun Lithium's two factories have begun maintenance since the beginning of this month. Leading lithium salt producers Ganfeng Lithium and Tianqi Lithium both reported preliminary net losses in H1. Although large miners like Pilbara Minerals remain committed to expanding production, other upstream enterprises may face increasing pressure to cut production. Despite some producers having minimal profit margins, they continue production to maintain workforce employment, avoid the costs of restarting production lines, and preserve relationships with buyers. Due to the narrowing profit margins at the resource end, supply forecasts from major resource-supplying countries like Brazil, Argentina, and Australia will be downgraded to varying degrees.
Currently, the weak growth prospects for electric vehicle demand continue to exert downward pressure on lithium prices. While the Chinese market is maturing, electric vehicle consumption in Europe and the US continues to show signs of weakness. Tariffs on Chinese electric vehicles imposed by the EU and the US have not only affected market sentiment but also led to a decline in actual demand for high-nickel ternary cathode materials and lithium hydroxide overseas.
The lithium industry supply chain is still digesting inventory, and automakers are rethinking their strategies. Hopes for a significant demand rebound this year are gradually fading, leading to increased focus on supply issues. The question now is, if prices stagnate or even fall further, how long can companies operating at marginal costs maintain normal production?
