Chinese Lithium Prices Drop as EV Demand Plummets

Within global mining, China has stood as a formidable force among nations by commanding approximately half of the world’s coal output in 2022 and experiencing an 11.4% production surge that same year. However, this past year revealed a different narrative: the country’s gold mine production (i.e., the world’s largest based on volume) in 2023 was 370 metric tons, a 61% decrease from 2022’s number. 

Likewise, copper production last year was 4.6 million pounds, but supply interruptions caused Chinese copper smelters to pay high prices for mined ore, leading to a joint output cut. This all led to China’s nonferrous mining revenue totaling $3.61 billion in 2023, a 12% decrease from 2022.

But this downturn in profit seems not to be a passing moment. Research indicates that China’s coal production will plateau, maintaining a modest compound annual growth rate of 0.2% to reach 4,666.7 million tons by 2030. 

As countries start embracing renewable energy sources and complications arise from the exploitation of lower-quality coal reserves, global coal demand will continue to decline. However, demand for China’s lithium—a key material in manufacturing electric vehicles (EVs)—has also slowed due to weak EV sales

chinese lithium prices drop ev demand plummets
Within the AlphaSense platform, we’ve seen a 155% increase in Event Transcripts mentioning the search terms “China” and “mining” over the last year. 

A series of events has left industry leaders questioning: What minerals are actually in demand? Is there room for a nation to overtake China as the mining industry leader? What are executives saying about this matter?

Using the AlphaSense platform, we dive into what’s unfolding in China’s mining sectors, how it’s affecting the EV market, and C-Suite commentary that will shape your 2024 industry outlook. 

Chinese Mining for a Greener Future

The global transition to “clean” energy sources to eliminate reliance on fossil fuels and other harmful resources is well underway—and China is playing a role in developing eco-friendly technology

According to the BBC, there are “at least 62 mining projects across the world, in which Chinese companies have a stake, that are designed to extract either lithium or one of three other minerals key to green technologies: cobalt, nickel and manganese. All are used to make lithium–ion batteries used in electric vehicles—which, along with solar panels, are now high industrial priorities for China.” 

China has also been a major refiner of lithium and cobalt for years, accounting for a substantial 72% and 68% of global supply in 2022, as reported by the Chatham House. These mining feats have positioned China to embrace a plethora of “green” manufacturing opportunities. 

Furthermore, China commands a staggering 60% of global manufacturing capacity for wind turbines and at least 80% of every phase within the solar panel supply chain—percentages President Biden vies to lower with tax incentives. 

Ultimately, demand for nickel, copper, lithium, and cobalt will quadruple by 2040 under the International Energy Agency’s Sustainable Development Scenario. However, reliance on China for these minerals and their by-products has raised concerns about energy security. It’s led the US and Europe to take steps toward establishing domestic supply chains for critical minerals, introducing a level of uncertainty regarding China’s continued dominance in the mining sector.

China’s Lithium in the EV Landscape 

Experts had high hopes for EV sales in 2024, with most projecting China to account for the majority of sales, as over half of all EVs sold globally came from China in 2023. Some believed “battery-electrics and plug-in hybrids [sales would] increase 21% in 2024 to 16.7 million, with 70% of those being fully electric” and that “six out of every ten EV sales would be made in China” due to Chinese manufacturers like BYD, Chery, and SAIC-GM-Wuling (SGWM) ramping up production and expanding their product lines.

However, nearly halfway into 2024, these forecasts now seem misguided.

steep decline in lithium prices
The Steep Decline in Lithium Prices: Recent drops in lithium prices is chiefly linked to the decline of electric vehicle sales within China and more broadly intertwined with general economic deceleration occurring across various sectors in the Chinese economy.

Disappointing EV sales have significantly reduced demand for lithium, resulting in steep price cuts for the mineral (e.g. Benchmark Mineral Intelligence reported an 80% drop in the last year alone). This downturn has forced numerous lithium producers to cease operations and cut staff

Likewise, in China, where a quarter of the world’s mined lithium output came from in 2023, analysts foresee lepidolite—a hard rock ore important for industrial lithium extraction—to suffer price reductions as lithium’s falling price makes production costly, and therefore, unsustainable.

Consequently, forecasts for China’s mined lithium output growth in 2024 have drastically lowered to 12% from 54%—mainly due to the lepidolite slowdown. Globally, projections share a 27% growth in mined lithium output, down from 42% previously. 

The bottom line: As the surplus of lithium dwindles, prices are likely to bounce back. This pattern of price-slashing sparking higher demand, subsequently leading to supply cutbacks, highlights the cyclical tendencies inherent to the market. Ultimately, lithium is essential to not just decarbonizing widespread transportation but also the energy transition.

Commentary from C-Suite

“The Chinese government has made significant adjustments to its mining policies. First, mineral resources are listed as an item for national security, as equal as food and energy and a series of policies and regulations have been introduced. However, despite high level policy releases and measures introduced by government ministries, there is still a huge gap that exists because in the long term, over the years, all stakeholders view mining development as a synonym to environmental damage. They cracked down on mining developments and a lot of the licensing authorization have been dedicated to provincial governments.

“So the central government and provincial governments have different views at times. And implementation has not been thorough. The overall environment, however, is favorable for mining companies to grow in China. [However] some companies, they used to apply for RMB 10 billion of exploration budget from the central government, but only RMB 1 billion was granted. That’s way too small… So we need market forces to play a role. Otherwise, it’s very difficult to address mineral shortage in China.

– Zijin Mining Group Co. Ltd. | Earnings Call 2024

Global EV sales were up over 20% year-to-date through the first quarter. And to keep this in perspective, global EVs sold in the first quarter of 2024 were equivalent to the total amount of EVs sold in all of 2020 according to data from the IEA. The story in China where so much of global lithium and energy storage demand continues to reside was even stronger.”

First quarter sales of EVs in China were around 2 million units, that’s up 32% from the prior year and March marked the second consecutive month with penetration rates above 30%. Expectations for EV sales are even higher in the second quarter, spurred by new economic incentives announced by the Chinese government in April and evidenced at the recent Beijing Auto Show, which featured 287 new energy vehicles, representing over 80% of all the vehicles on display. And some industry analysts have opted to lower near-term demand forecasts, accounting for higher recent plug-in hybrid EV versus battery EV sales mix and some other data points.”

– Arcadium Lithium Plc. | Earnings Call Q1 2024

“Some thoughts about the lithium market…There’s a narrative in the market that EV sales are imploding and that is simply not true. In the first quarter of 2024, global EV sales were up 30%, the same increase as the market experienced a year ago. While there’s been some softness in the U.S., this is a global story, and I imagine there are a lot of minerals and chemical CEOs who would love to see 30% year-on-year growth in their key end markets. Several OEMs have announced April 2024 results and are showing continued year-over-year increases. Ford marked a 129% increase in EV sales from a year ago. Volvo grew 53% from the same period last year. Kia had an all-time monthly EV sales record up 61%, and the list goes on.

Two years ago, we reached historically high prices for lithium. As you know, those prices have come down sharply, but around February, we began to see some recovery. Over the last 8 to 10 weeks, spodumene concentrate prices have risen by 30%, which is obviously good news for us as a spodumene concentrate supplier. We are hopeful that prices continue to recover as we believe current prices are well below the incentive levels required to fund and develop most of the world’s greenfield lithium projects.”

– Piedmont Lithium Inc. | Earnings Call Q1 2024

“In a nutshell, Chinese domestic steel demand has been weak this year, which caused them to increase their steel exports, and that supply glut has led to lower steel prices across the region, which in turn has squeezed margins across the whole supply chain. As we know, China has been in a shift toward building out energy transition and consumer-related industries at the expense of less spending on traditional real estate and infrastructure. Looking forward, however, there are reasons to expect that the Asian steel markets may rebound in the second half of the year with a corresponding uptick in overall met coal pricing.”

“First, in China, there’s a growing expectation of improving downstream demand due to recent project funding via accelerated bond issuances. In addition, India has progressively had a larger role in impacting the global met business. This may be equal or even greater than the Chinese market influence as we move forward. One aspect of this influence on the markets we’ve seen is that now both India and China’s seasonal buying patterns have more weight on price. As an example, China seems to be a more aggressive buyer in Q4 for their Q1 construction activity.”

– Ramaco Resources, Inc. | Earnings Call Q1 2024

Track Mining Industry Trends with AlphaSense

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Tim Hafke
Tim Hafke
Content Marketing Specialist

Formerly a writer for publications and startups, Tim Hafke is a Content Marketing Specialist at AlphaSense. His prior experience includes developing content for healthcare companies serving marginalized communities.

Read all posts written by Tim Hafke