Argentina tripled lithium carbonate production capacity in last two years
Argentina, the world's No. 4 lithium producer, has four projects in production.
The lithium market is being shaken-up by a sharp, sustained slump in prices and a demand slowdown, which has disrupted projects and forced miners to cut production and look for cost-cutting measures, including layoffs.
While the light-weight metal remains a crucial raw material for batteries, consultancy Wood Mackenzie says the market is transitioning towards maturity and its actors need to adapt to the new conditions.
The analysts note that key elements of this market transformation are a slow down in electric vehicle (EV) sales and the declining use of lithium within evolving cathode chemistries.
“Global plug-in EV sales are projected to rise by 33% this year, a significant drop from the average annual growth rate of 71% observed between 2021 and 2023,” says Allan Pedersen, principal analyst for lithium at WoodMac. “Lower government incentives and inadequate charging infrastructure are expected to curtail EV sales this year [and] this market shift will have implications for lithium demand.”
A supply glut that pushed down prices in 2023 is here to stay, the consultancy warns, as several new resource projects and conversion projects are set to start this year.
“The lithium market is going through tumultuous times,” says Pedersen. “While demand has nearly tripled in the past three years, reaching around one million tonnes in 2023, the growth rate is expected to moderate. Nevertheless, the industry’s fundamentals remain excellent, driven by the global push to decarbonize,” Pedersen adds.
As we move into 2024, WoodMac predicts delays in project development as companies seek to preserve cash.
Single-asset companies cannot halt production without jeopardizing their cash flow, leading them to explore alternatives such as high-grading or reducing spending. In contrast, lithium majors with multiple assets, such as Albemarle, Tianqi and Ganfeng, can curtail production to restore market balance and maximize long-term asset value, the consultancy says.
Mergers and acquisitions, WoodMac concludes, are likely to increase this year as lithium majors look for growth opportunities and top mining companies consider entering the market.
