Surge in supply in 2024Demand calls forth supply. Under-supply drives up prices. Higher prices sometimes call through more supply than will sustain the price. That’s when bubbles form and we have over-supply. Bubbles won’t fully deflate until over-supply ceases to exist. This happens when prices fall below the marginal costs of some of the existing producers that they drop out of the market.
Output in top producers Australia and Latin America will rise 22% and 29% respectively, while that in Africa is expected to double, driven by projects in Zimbabwe. Chinese production will also jump 40% in the next two years, said UBS, driven by a major CATL
(300750.SZ) project in southern Jiangxi province.
Some analyst estimate that the supply surge will result in a supply a global lithium surplus of 12% of 2024, up from 4% this year.
The spot price of lithium carbonate hit a more than two-year low of 96,500 yuan, down from the peak price of 600,000 yuan, per metric ton this week. In China, some major producers in Jiangxi, normally a third of the country's output, have already lowered production since September, according to information provider Mysteel.
But producers elsewhere like the lakes of northwestern Qinghai province, with costs estimated at about 50,000 yuan per ton, are still expanding.
Costs for major producers using spodumene, another ore, imported from their own mines are estimated by analysts at about 70,000 yuan.
So the spot price of lithium could eventually go down to between 50,000 and 70,000 yuan before enough mines decide to drop out of production. In the meantime, potential buyers of lithium would focus on existing mines for procurement. They might not want to deal with lithium mine developers.