The lithium industry is facing an oversupply crisis: how will oversupply affect the market?
Oct,04,24
The lithium industry is facing an oversupply crisis: how will oversupply affect the market?
In July 2024, Wood Mackenzie released a report on the imminent oversupply situation in the lithium industry. The report points out that the price boom from 2022 to 2023 has attracted a large amount of investment, especially from China, leading to strong growth in lithium chemical supply. However, as demand growth slows down, it is expected that the lithium market will experience oversupply starting from 2024, and this situation will continue until 2029. The report also predicts that the battery grade lithium chemical market will be more tight than the overall market, as demand in this niche market continues to grow, but production difficulty is also greater.
Oversupply is coming: It is expected that the lithium market will experience oversupply from 2024 to 2029, and then the market will shift towards undersupply.
Market balance forecast: By 2026, the market may face unadjusted excess, reaching 436000 tons of LCE (lithium equivalent), accounting for 26% of demand.
Resource limitations: The increase in lithium chemical production may lead to a shortage of spodumene concentrate, which will limit the production of lithium chemicals.
Inventory days: Excess inventory may result in the industry needing to hold excess inventory for up to 114 days of demand, which may be difficult to effectively manage in the long run.
Product differentiation: The battery grade lithium chemical market will be more tight than the overall market, while technology grade lithium chemicals may face greater oversupply.
Industry response strategy: Faced with surplus, the industry may need to further process technical grade lithium chemicals, increase inventory, or reduce production to match demand.
Industry outlook: The lithium industry is full of uncertainty in the future and requires close attention to inventory changes, price trends, and the impact of recycled materials on the supply chain.
