Chilean lithium prices fall, leading to a decrease in lithium export revenue in 2024

Chilean lithium prices fall, leading to a decrease in lithium export revenue in 2024

According to a report by BNamericas, Chile's lithium export revenue is expected to decline again this year due to price declines, similar to the trend in 2023. Chile's lithium carbonate equivalent (LCE) production is expected to reach 275000 tons this year, with a growth rate of 2%. However, a report from the Chilean Copper Commission (Cochilco) shows that due to price declines, the country's lithium export revenue for the first five months of this year totaled $1.59 billion, a 65% decrease compared to the same period last year.

As of last week, the price of 99.2% grade lithium carbonate was approximately $9800 per ton, a decrease of 15% this month. This downward trend is expected to continue until 2027, as several lithium projects around the world plan to begin production during this period.

Juan Esteban Fuentes, a market analyst at Benchmark Mineral Intelligence (BMI), predicted at a meeting in Santiago, Chile that lithium production will increase between 2026-2027. He also predicts that there will be an oversupply in 2028-2029 and a shortage in 2030. During this period, it is expected that the price will rise from $14000 per ton to $36000 per ton, and then stabilize at around $25000 per ton.

The expected supply shortage is mainly driven by the global energy transition, which accelerates the production of batteries, cathode materials, electrolytes, anodes, solar panels, and other downstream products.

On the other hand, Cochilco pointed out that sluggish sales of electric vehicles (EVs), strong sales of hybrid vehicles that use less lithium per unit of energy, and the launch of new products are all reasons for the decline in lithium prices. The price of lithium rose sharply in 2022 and 2023, with lithium carbonate prices reaching a peak of $70000 to $80000 per ton, prompting companies to reduce production plans when prices began to decline.

Lithium Market Outlook: Global Overproduction by 2024

This year, global lithium carbonate production is expected to reach 1.25 million tons, higher than last year's 988000 tons. On the other hand, the demand is expected to reach 1.13 million tons. Cochilco predicts that next year's production will increase to 1.59 million tons, and demand will reach 1.4 million tons. This means there will be a surplus of 117000 tons and 191000 tons this year and next year, respectively.

From this perspective, the global lithium production in 2015 was only 172000 tons, with a demand of 191000 tons. From 2015 to 2024, the average annual growth rate of lithium is 25%.

In just 9 years, lithium production has expanded from 8 countries and 20 mines to 14 countries and 62 mines. It is expected that by the end of this year, the number of projects will reach 80. Fuentes pointed out that China, Australia, and Argentina collectively produced 700000 tons of LCE.

By 2034, the number of global lithium production projects is expected to increase to 150, spanning 29 countries, and global production will reach 2.6 million tons.

Electric vehicle production drives demand growth

The demand for lithium is mainly driven by the production of electric vehicle (EV) batteries, as internal combustion engine vehicles are gradually being phased out. According to data from the International Energy Agency (IEA), global electric vehicle inventories are expected to reach 245 million units by 2030, accounting for one sixth of the world's total vehicle inventory. By 2035, this number is expected to increase to 505 million vehicles, accounting for one-third of the global total of automobiles.

Marcos Lima, former CEO of Codelco, suggests that as the market expands, companies should reassess their sales strategies. He emphasized the importance of diversifying customer assets as the market size expands.

Lithium projects in Chile and Argentina

There are seven lithium projects under development in Chile, including Sociedad Qu í mica y Minera de Chile (SQM) and Albemarle's expansion project in the Atacama Salt Flats in the United States. Once Chile's national lithium strategy is fully implemented, it is expected that the number of projects will further increase.

The Argentine Ministry of Economy reported that there are 38 lithium projects in the later stages of development in the country, with a potential annual production capacity of 464400 tons of LCE.

According to a report from the Rosario Stock Exchange in April this year, two mines in Argentina produced 50700 tons of LCE last year, and by the end of this year, seven new projects will be put into operation.

Chile remains the world's second largest lithium producer, with Argentina ranking fourth. However, with the increase of Argentina's lithium production capacity, it is expected that Argentina's ranking will rise by 2030.