It was a spectacular market crash. Analysts warn: This is not the end of the problems

Luc Williams

Spot price of lithium carbonate in China, a key material used to produce batteries that power electric vehicles, rose to its highest level since December. In 2023, its price dropped by over 80%. Meanwhile, on the Guangzhou Futures Exchange, the most active contract rose by more than a fifth over the past month.

Lithium is a key commodity for the energy transition because of the role it plays in batteries. However, the global excess of metal has affected spectacular price drop last year.

Modest recovery in the lithium market in China. Spot prices are the highest in three months / Bloomberg

Despite last year's collapse, major manufacturers have not lost faith. No. 1 company in the sector, Albemarle Corp. maintains that low prices are unsustainable and No. 2 SQM continues to expand while maintaining a positive outlook.

Reducing production stabilizes the market

Price drop prompted some manufacturers to reduce production. Core Lithium Ltd. was among the companies that suspended part of their mining operations to reduce costs.

The lithium market is regaining balanceand the industry is limiting production and projects,” UBS Group AG said in a recent report, while warning that a large oversupply remains despite production restrictions.

However, not everyone is convinced that the rebound will take place quickly. The rise in lithium contract prices “should not be interpreted as the end of the bear market,” Goldman Sachs Group Inc. said in a note. The surplus remains significant, he warned.

The BloombergNEF analyst was also cautious. “The short-term price increase is likely a direct result of China's environmental restrictions,” he said.


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