The lithium boom in China, which had been experiencing rapid growth, is now showing signs of slowing down due to sagging prices that are impacting high-cost miners in the industry. This slowdown reflects a shift in the dynamics of the global lithium market, which had previously seen robust demand driven by the burgeoning electric vehicle (EV) industry and the push for renewable energy storage solutions.
A slump in the price of lithium, a key raw material in electric car batteries, is dragging on China’s mining of the ultralight metal which together with a costly extraction process is prompting a reassessment of output growth and new project plans.
The softening demand for electric vehicles (EVs) has had a significant impact on global lithium prices, with a benchmark tracked by Benchmark Mineral Intelligence plummeting more than 80% over the past 12 months. This sharp decline in prices has led to the closure of many lithium production facilities worldwide and forced companies to implement job cuts to cope with the challenging market conditions.
China, which accounted for approximately a quarter of the world’s mined lithium output in 2023, is particularly affected by this downturn. Analysts anticipate that the mining of lepidolite, a hard rock ore used in lithium production, will suffer as a result of the prolonged price slump. Lepidolite mining tends to be relatively expensive compared to other lithium sources, making it particularly vulnerable to unsustainable production during periods of low prices.
The downturn in lithium prices underscores the challenges faced by producers in balancing supply with fluctuating demand in the EV market. As EV sales slow down or face uncertainties, the lithium industry must adjust production levels and cost structures to remain viable in the long term. This may involve reevaluating mining operations, exploring cost-saving measures, or diversifying into alternative markets to mitigate the impacts of the price slump.