The Lithium Transition – A Recap Of 2024 & Thoughts On 2025

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By Joe Lowry, President Global Lithium LLC

[The market commentary below was first published last week on LinkedIn. FNArena has been granted permission to re-publish in full on the condition no changes are made, including typos. All pricing info should be read as US$.]

As is my recent custom, this is a year-end stream of consciousness post with a maximum allowed time of 90 minutes to comment on the past year and reflect on the future. No attempt at editing beyond auto spellcheck just a download of my thoughts but I do allow myself to check my hard drive for reference data. I will jump from one topic to another and not always with logical transition sentences.

It is well established that following the price spike and lithium euphoria of 2022 that lasted into 2023 the market turned quickly as several nimble producers in China leveraged the brief bubble pricing to bring on previously uneconomic lepodilite resources and exploit the lack of environmental oversight in many parts of Africa to resource various forms of inferior but usable lithium feedstock as well expand existing hard rock assets. The precipitous spot price drop of 2023 was followed by lesser declines in 2024 and continued the squeeze on contract pricing that now is, in most cases, almost indistinguishable from the China spot price.

Yet, price is still relatively high by historical standards which few acknowledge because most people writing about the topic have limited experience and many of their editors prefer clickbait headlines fueling negative sentiment on the space.

The major price reporting agencies provide limited historical data as well. I have price data going back to 1980 ten years before I was involved in the industry thanks to a history book of industry financial data I was given in my first day on the job.

The lithium industry has grown significantly in the last four years. For perspective, in 1990 the global market for lithium chemicals was less than 5 percent of what it is today from a volume perspective. The average lithium carbonate price was below $2.5K/MT when I joined the industry. When SQM entered the market in the late 1990s most of my customers were paying over $4K/MT for lithium carbonate. Between 1997 and 2005 global average carbonate prices dropped below $2K/MT (based on SQM selling for as low as $1.3K) before rising back to $2.6K. By 2010, the average price was over $5K but remained below $6K until the price spike of 2016-18 when average price approached $20K with some paying over $25K. For those that are compelled to fact check me, feel free but I promise you the AI answers are all over the block and those looking at import and export stats need to understand how to deal with transfer prices.

On January 1, 2016, I posted on Linked In about the largest disparity between high and low market prices I had ever seen. By the end of that month, I posted the “mea culpa” that appears below wondering how price could move so far so fast much faster than I had ever seen in the prior quarter century of my industry experience.

Two points to be made here, lithium price was historically volatile within a range below $10K/MT until the 2016-17 price spike which lasted less than two years before a multiple year price decline ending in 2020 where SQM and Orocobre made sales below $4K.

I dragged you through that narrative to make the point that today’s price is considered “low” because the cost curve has increased significantly. Even at $10K/MT, many lithium producers are losing money, so the current situation is unsustainable especially in a rapidly growing market. Yet by historical standards, the current price is much higher than any annual average price prior to 2016. Yes, I know I am supposed to be writing about 2024…. Bear with me.

Below are the first paragraphs of my 2016 price “mea culpa” post. The full articles are still on Linked In.

As a reference point, below is the Benchmark Mineral Intelligence global average lithium carbonate price chart back to 2016 which is as far back as their data goes.

Of course, if you take the performance of only the past eight years, the current price is on the low end. Whether you think the current oversupply lasts a few more months or a few more years, the result of the current period of price below the western incentive price for capacity additions will likely end in another period of shortage that ends with a price spike. My belief is that price moves towards $15K in the second half 2025 and $20k by the end of 2026. That is as close to a price prediction as I intend to get. Moving on….

On episode 202 of the Global Lithium, Podcast Daniel Jimenez does an excellent job reprising what happened in e-transportation in 2024. While the press obsesses with the failures of American and European legacy OEMs performance in EVs, the Chinese and Tesla continue to prosper with a caveat. PHEVs have increased in popularity in China which is a negative for overall lithium demand growth in the e-transport segment based on smaller average battery size. On the other hand, greater than expected global growth in ESS has more than compensated for the trend away from pure EDVs in the Middle Kingdom.

Now that batteries drive over 85% of LCE demand, I use credible battery demand data to simplify my LCE forecast. The rest of the market grows at GDP +/- a percent or two. Whether you use Rho Motion’s numbers or another source, the total amount of GWH is viable indicator but is subject to the same vagaries as more complicated methods such as how much of the cathode came from prior year inventory, etc. There are no perfect forecasting methodologies.

In 2024, the trend of large energy and mining companies investing in lithium gained traction with Equinor’s investment in Standard Lithium and Rio Tinto acquiring Arcadium. Exxon also continued to advance their interests in the Smackover. For these investments to be successful, direct lithium extraction that doesn’t require evaporation ponds must become viable at commercial scale. We could see commercial scale DLE in Argentina in 2025 if Eramet’s ramp up is successful, but this is not a fait accompli. In any case, having large company balance sheets advancing projects is something the lithium industry needs to have any chance of getting to 3 million tons of supply by 2030.

To put the challenge in perspective. Assuming supply in 2024 of approximately 1.2 million tons, the industry needs 1.8 million tons of new supply in five years or the equivalent of 45 new 40K MT operations. I challenge anyone that reads this to provide a credible scenario of that happening at today’s prices. Many pundits like to assume China can add capacity at any level they choose. I am happy to take the other side of that argument, especially in the current price environment.

I understand China has significant excess conversion capacity, but they need feedstock to utilize it. Yes, China has ramped up both internal hard rock and brine, but their assets are in general not world class which is why they are also invested in Australia, South America and Africa. Even the Chinese have struggled bringing capacity online outside China. Look at Zijin at 3Qs and many of the projects in Africa. No doubt China did a brilliant job of flipping the market after the 2022 bubble, but the low hanging resource fruit has already been exploited and the volume challenge grows each year. There are five years to ADD 150% more capacity than the current supply.

Look at how many LCEs China, Australia, South America and Africa currently produce and have at the execution stage then add North America. You can’t get there from here at $10K carbonate or $850 spod. Adding a couple hundred thousand tons of lepidolite new supply from Africa to an 850K market in 2022-23 is one thing adding nine times that in the next five years will require massive investment we aren’t seeing, working commercial DLE and flawless execution. Good luck with that.

We all know that there is no shortage of lithium in the earth’s crust but finding economic resources and developing them takes time. Chinese mining giant Zijin has struggled to bring on a modest brine project in Argentina and continues to push back their timeline. Even my China favorite, Ganfeng, has been working as the sole developer of Marianas in Argentina for years. We have seen a slowing of “Ganfeng speed” as they try to develop projects on multiple continents. Bacanora has largely been forgotten by most analysts. We will see this year what happens with Goulamina. Other China majors like Tianqi and Yahua continue to struggle with various projects so the mantra that China can quickly get to any volume needed will be tested and in my opinion fail.

The current price environment has exposed the weakness of leading western lithium companies like Albemarle. The world’s largest lithium company needs a management makeover soon. Despite access to the best hard rock and best brine assets in the world, their bloated organization has had to be trimmed more than once. ALB is lucky that Gina stopped them from investing in Liontown at a nosebleed valuation. I hope they sent Ms. Rinehart a nice Christmas gift. That is not a shot at Liontown but rather a statement that ALB seems to continually misjudge the market.

Pilbara, on the other hand seems to time their moves well. I liked the acquisition of Latin, the hydroxide partnership outside of WA and their positioning for the future. Yes, I am a fan of a heavily shorted stock. Why? I believe most investors continue to misunderstand lithium and will until the industry grows up.

Before I wind this down, I want to emphasize that I don’t believe a company like Rio Tinto will necessarily speed up development of the Arcadium project portfolio in the near to mid-term but in the long term the viable projects will get built. Livent and Allkem continually kicked the development can down the road. Combining them into Arcadium created the opportunity to get the assets into more financially viable hands. Rio will struggle but they have the cash to ultimately succeed. Watch Rincon closely Rio’s recent announcement to go to 60K MT made little sense to me but might have been a false flag to ensure their acquisition of Arcadium closes. Post closing, Rincon is far from their best brine asset so why double down there? We won’t know until early in the next decade whether Rio Tinto becomes a major lithium producer. What we do know is that Arcadium was just more of the same expansion futility we got from Livent and Allkem. Good luck Rio.

I believe that the next five to ten years sees brine as the leading source of lithium despite the long project lead times. Look at the cost curve. I also believe that LAC will validate sedimentary lithium at Thacker Pass, but we will have a few more of these posts before I can declare victory.

The question I have been asked most in the past two months is what impact Donald Trump will have on the industry. I don’t think DJT is going to hurt lithium or the energy transition. Aside from Tesla, the US isn’t much of a factor in critical metals, cathode, batteries or EVs. The incoming President is an easy target for people with a green axe to grind. If only on national security grounds, I expect the US to develop a modest lithium battery supply chain in the next five to seven years. I also think we would do well to allow CATL and a China EV maker or two to have US JVs with reasonable guardrails the same way China was “ICE enabled” in past decades by VW and GM. Expect DJT to do the unexpected especially with Elon advising him.

A final word to lithium investors especially the retail investors that often write. No investing advice here but lithium stocks are less than 8% of my portfolio and even during the bubble valuations in 2022 were never as much as 25%. My top stock holdings are Apple, Alphabet (Google), Netflix, and Berkshire. I have owned all these for over a decade. Tesla is in the top ten as are three pure play lithium companies that if you listen to the podcast, you likely know the names.

Lithium investing isn’t easy. Those that blindly follow the “NBT” often suffer financial consequences. I remain a believer in lithium but am also an investing pragmatist.

Thanks for reading.

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If anyone cares to participate – you can comment or respond at globallithium.net/contact

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Companies mentioned include Arcadium Lithium ((LTM)), Liontown Resources ((LTR)), Pilbara Minerals ((PLS)), and Rio Tinto ((RIO)).

The commentary above does not by association represent FNArena’s view (we don’t have a view, we publish and report on what experts have to say). None of it should be interpreted as investment advice.

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