Lithium price fall to 24-month low amid slowdown

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The price of lithium, a key metal used in manufacturing batteries for electric vehicles (EVs), recently plunged to its lowest level in two years amid expectations that the ongoing slowdown in the battery industry would last until the end of the first quarter of 2024.

According to the data from the Korea Mineral Resource Information Service, the price of lithium carbonate was 131.5 yuan ($18.15, 23,597 won) per kilogram as of November 17, the lowest since September 2021. The price plunged by 77 percent compared to a year ago when it hit 576.5 yuan per kilogram.

Data from the London Metal Exchange (LME) also showed that the price of lithium hydroxide, a source mainly used by South Korean battery companies, was $21,238, or 27.36 million won, per ton as of November 17, down 42 percent from the $36,652 per ton it traded at in August.

Meanwhile, cathode manufacturers expect their ongoing earnings struggles to continue into the fourth quarter of 2023. The manufacturers enter contracts with battery cell makers based on a price linking sales price with metal prices, and when lithium prices decrease, these manufacturers are forced to sell their products made of lithium sourced at higher prices, leading to falling profitability. Given that the pricing of batteries is deeply connected with the cost of cathode materials, the decline in lithium prices is expected to hit battery cell manufacturers’ overall earnings.

LG Energy Solutions Ltd. and SK Energy Co. saw their growth slow in the third quarter after more than six quarters of sales growth through the second quarter of 2023. In the third quarter, LG Energy Solutions earned 8.2 trillion won in sales, down 6.3 percent year-on-year, and SK energy posted sales of 3.17 trillion won, down 14.2 percent over the same period. According to the company’s quarterly reports, LG Energy Solutions’ average purchase price of cathode material at the end of the third quarter was $36.29 per kilogram, down 17.5 percent from the end of December last year. SK energy’s cathode purchase price per kilogram was 43,849 won ($33.87), down 29.2 percent over the same period.

Battery prices are expected to keep going down until the first quarter of 2024.

“The costs of lithium and nickel have dropped significantly, with a 70 percent decrease for lithium and 30 percent for nickel,” a senior official from LG Energy Solutions said at a recent earnings call. “The decreases in metal prices will hit the pricing of batteries until the end of the first quarter of 2024.”

A slower growth in EV sales poses another challenge to the battery industry. Energy market tracker SNE Research recently unveiled a revised forecast for EVs and plug-in hybrids to be sold throughout this year, with a decrease of 1.07 million units compared to the initial forecast.

The battery industry is expected to suffer a prolonged slowdown, and “a potential rebound will likely happen as early as the second quarter of 2024,” according to Mirae Asset Securities Co. analyst Kim Cheol-jung.