Analysts’ hopes for a lithium price recovery were dashed as prices continued to fall in June. Stockpiles are growing as electric vehicle demand remains sluggish.
Spot prices in China hit their lowest point since August 2021, with futures contracts also dropping. This follows a massive plunge in 2023 due to oversupply and weak demand growth.
Despite a brief price stabilization earlier in 2024, the supply chain struggles with excess inventory, and customers are delaying purchases. This bearish sentiment is hurting lithium producer stocks like Albemarle and Piedmont Lithium.
Rising production and a predicted summer slowdown are further pressuring prices, according to analyst Susan Zou. The earlier rebound was fueled by temporary factors like the Lunar New Year holiday and speculative buying.
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Electric vehicle manufacturers are cutting lithium orders, anticipating lower prices in the near future. However, some traders see limited room for further decline, with some producers already facing squeezed margins.
Lithium carbonate stockpiles in China have been rising, with inventories held by manufacturers and other users increasing significantly.
Investor confidence in lithium producers has plummeted as major automakers like Ford, GM, and Tesla have scaled back electric vehicle production plans. Stocks of Albemarle, Lithium Americas, and Piedmont Lithium have all suffered significant losses in 2024.
Investors are prioritizing companies with existing customers and production, according to Chris Berry of House Mountain Partners. Short-term market impatience is evident, but some long-term investors are betting on faster development of new lithium extraction technologies.
Despite the price slump, some large players like Equinor ASA are still making deals in the lithium space.
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