The lithium market is ahead of the needs of the electric automotive sector

Open-pit lithium mine

In France, as we know, the year 2040 will mark the end of the thermal engines. In the meantime, to replace gasoline and diesel, we expected a rush to lithium that, it seems, will not happen, as the extraction is ahead.

With the end of the thermal vehicles announced in most countries by 2040, the automotive industries are preparing the market by launching more and more electric models. To meet this demand, lithium mines are proliferating all over the world to find the famous raw material.

An offer well above the demand

Since 2015, the opening of mines has multiplied and the price has increased, going up to triple in 2018 when the milestone of 5 million vehicles has been reached. It was at this time that builders began to worry about the supply. The price went up to $ 21,000 per ton of lithium hydroxide from Asia, forcing Australia to open six more lithium mines. 

However, far from seeing the offer explode, demand stagnates or slowly increases. As a result, many farms end up with lithium stock on their hands. 

So analysts Macquarie Capital as Vivienne Lloyd states in their July report: "  The latest data on electric vehicles shows a slow increase; in addition to an oversupply, demand is now a problem. "

A painful price drop for producers

Only here, the rush to the electric car and therefore the need for lithium does not happen, or so too slowly. The price of lithium fell by 30% to $ 14,000 (€ 12,000) per tonne for Asian lithium hydroxide mines. This worries the market because no one yet knows what minimum price this raw material could reach. 

In the first quarter of 2019, electric vehicle sales increased 90% over the previous year. And while this number may suggest healthy sales, the increase was twice as large between 2017 and 2018, according to BloombergNEF's Nikola Soulopoulos in London.

This fall in lithium sales, therefore, leads to a drop in production. In China, factories have already announced delays in production, which is also due to the difficulties caused by the transformation of ore into a lithium battery. In Australia, factories reported a slower pace of production. 

BloombergNEF London specialists announce each year that the price of electric vehicles will be lower than the thermal ones. First announced for 2026, and now in 2022, it could be that this decline in the price of electric cars is further accelerated by the fall in the price of lithium, a boon for future buyers.