What Lithium’s Roller-Coaster Ride Means for Miners

Since 2021, lithium prices have surged 10-fold, only to crash back to earth, wiping out billions of dollars in miners’ shares and forcing supply cuts. The ripple effects of this ride are only just beginning.

The reversal of fortunes for the electric-vehicle battery metal has been nothing short of stunning. Its rapid ascent to a record in late 2022 sparked a rush by mining and refining companies to expand output, while automakers scrambled to lock in supply deals.

A little over a year later, it’s a different landscape. Major producers are issuing profit warnings, and in Australia — the No. 1 source of unprocessed lithium — miners are retrenching. Even Greenbushes, the country’s largest project, announced cutbacks this week.

The turnaround is bad news for the nation’s economy, where the hope was that energy-transition metals would breathe new life into a mining sector dominated by iron ore and coal. It’s already prompted discussions of government support, with one industry group calling for tax credits and royalty reform.

Lower lithium prices are, in theory, good for automakers as well as EV buyers. But in practice, the slump may deter investors as they wait to see whether the market has bottomed.

That could put supply out of kilter with demand and eventually set lithium up for another dizzying rally, a repeat of the boom and bust that’s plagued the industry.

The slide in share prices of lithium miners and refiners is also speeding consolidation. With many companies becoming attractive takeover targets, M&A is likely to accelerate, reshaping an industry that’s still set to grow rapidly when demand heats up again.

The big question is when this revival will happen, with the market looking for clues in the depletion of inventories across the battery supply chain. For now, there’s growing pessimism around EV sales in both China and Europe.

Much will depend on how quickly global interest rates come down, and the extent to which growth picks up pace. Just as vital, though, is supply constraint. Can miners hold production back long enough to spur a rebound in prices?

–Annie Lee, Bloomberg News