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The Electric Car Boom Could Be Over… For Now

EV

A new report from Bloomberg shows how the glut in lithium supply could suggest the electric car boom is over for now.

There was once a time when lithium carbonate spot prices soared higher, all with increasing demand from electric car companies. This all ended in the late 4Q17 when the global economy entered into a cyclical downturn. In the last 15 months, lithium spot prices have been halved.

The result of the glut is a combination of factors, including decreasing electric car demand from China, and Australia opening up six new lithium mines.

Lithium prices fell -31% in 15 months, and with no confirmation of a bottom, could retest 2016 lows in the coming quarters.

No one knows when prices will stabilize. This comes at a time when Australian lithium production could increase by almost a quarter over the next two years, plus the second-largest producer in Chile is expected to double output by 2023/24.

Chile's SQM has seen 2Q19 sales collapse by half, to $70.2m, due to lower spot prices. And in China, Tianqi Lithium, the country's largest producer, said profits in 1H19 crashed 85% YoY.

Macquarie Capital analyst Vivienne Lloyd wrote a recent note explaining how the electric car industry was slowing, "inferring that on top of excess supply [of lithium], demand [for EVs] is now a problem."

Despite the price rout, there's some demand coming from Europe where new electric cars are being rolled out. 

Tianqi Lithium said the rapid investment into the lithium industry over the last five years was "returning to normal" and that uncompetitive producers would then be "eliminated:" basically describing a bust cycle is underway in the space.

The short term view is that global electric vehicle demand continues to wane across the world, forcing a further decline in spot prices that could trigger a larger bust on the producer side of the market in 2020. 

With that being said, lithium spot prices overlaid with E-mini S&P 500 futures could be a predictor of where markets are headed next:

By Zerohedge.com

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Leave a comment
  • James Hilden-Minton on September 02 2019 said:
    It's super naive to think that the price of lithium falling back to more stable historic prices indicates anything negative for the EV industry or for stationary storage. For the the last 9 years, EV battery pack prices have consistently fallen about 20%. Critics argued this pace of cost decline would slow down because cobalt, lithium and other mineral prices would continue to go higher and higher. Those critics were wrong about perpetually high mineral prices, and now there are no mineral price headwinds to prevent battery costs from falling 20% this year and the next.

    Low lithium prices is nothing good for the growth of EVs and grid batteries. To suggest otherwise is empty spin.
  • Luis Destro on September 02 2019 said:
    Well years ago when they introduced the catalytic converter for emissions, palladium was thought to be in short supply and never to keep up with production.
    Lithium became the rage with electric vehicles coming, so production ramped up faster than expected.
    Right now, cobalt is the real bottleneck. This is also the reason Tesla reduced the percentage of cobalt in their production.

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