The frenzy peaked in November last year when prices for lithium carbonate – a precursor compound used to make lithium-ion batteries – hit an all-time high of $130,191 a tonne after the left-leaning Chilean government moved to nationalise its lithium industry,which led to fears supplies from the world’s second-largest producer might be restricted.
Governments around the world are rushing to secure minerals such as lithium,copper,nickel and rare earths that are urgently needed as raw materials to build renewable energy networks and make electric cars to combat climate change.
But as production from a fresh crop of new mines in Australia lifted and demand from China ebbed,lithium’s value crashed 70 per cent to a low of $35,911 in April,which tested investors’ appetite and the resilience of companies such asPilbara Minerals,Liontown Resources and Mineral Resources.
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Morgans analyst Max Vickerson said there were early signs of green shoots in the China spot price for lithium. “It’s not a full-throated recovery yet,” he said. “Chinese EV production increased significantly in March. That suggests there is a recovery under way in the market,but we haven’t seen big battery producers restocking just yet.” Restocking China’s battery supply chain is likely to support prices.
China,a powerhouse for electric vehicles,is ending cash subsidies forhouseholds purchasing EVs,which has slowed growth in new sales by nearly a quarter over the first three months of this year. At the same time it is tightening emission standards on internal combustion vehicles,prompting car dealers to cut prices of fossil fuel burning vehicles in an effort to offload their stock by July 1.
The resulting turmoil in lithium demand has coloured the outlook for the nascent sector in Australia,but Pilbara Minerals chief executive Dale Henderson recently told investors he remained “very positive on the structural deficit for lithium”.