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The freefall in lithium prices could be about to start reversing soon as demand for EVs and energy storage is expected to pick up from this quarter onwards, analysts say.
The price of lithium in China has crashed since the end of last year amid sluggish demand in the world’s largest EV market. But signs have recently started to emerge that the price decline could end soon.
“Inventory in the supply chain is already at a low level, and with the recovery of downstream demand in the second quarter, lithium prices could stop falling and stabilize,” brokerage Huaan Securities said in a note carried by Bloomberg.
In order to halt the price crash, China's top lithium producers, including Tianqi Lithium and Ganfeng Lithium, reportedly agreed last month to establish a minimum price of 250,000 yuan, or $36,380, per ton of lithium carbonate. Since November, lithium prices have collapsed by more than half, with the drop accelerating in recent weeks. Offers reportedly fell to 260,000 yuan per ton, as Chinese traders raced to dump mounting supplies.
Companies in China’s key lithium-producing hub have also reportedly moved to reduce lithium output following the recent price collapse amid weak demand for EVs, local media reported earlier this month.
In Yichun, the top-producing hub for lithium in China, some unnamed producers – including major ones – have reduced supply, Chinese outlet The Paper reported.
Earlier this year, reports emerged that China had moved to supervise the extraction of lithium from lepidolite, the most abundant lithium-bearing mineral but a secondary source of this metal, in Yichun, often dubbed the ‘Asian Lithium Capital’ because of its huge lithium reserves.
Still, analysts see price increases in the lithium market in the medium and long term, as demand for lithium in the energy transition will only grow.
China accounts for a large part of the global lithium supply and dominates the global lithium-ion battery supply chain.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.