Semafor Signals

Insights from MarketWatch, Global Automotive Trade Network, and La Nación

The News

Global lithium prices are shrinking, largely due to China’s slowing demand for electric vehicles (EV), according to a new report.

The price of lithium has collapsed by more than 80% in the past year, now ringing in at $13,200 per ton (its lowest level since 2020), according to data group Benchmark Mineral Intelligence.

The oversupply of lithium means that EV prices — which have struggled to compete with gas-powered car price tags — could start falling. But in the meantime, major lithium suppliers, like Australia and South America, are scrambling to find new business models.

SIGNALS

It’s not just a China slump slowing EV sale growth

Global EV sales are still booming, but the growth rate is slowing “from ‘tremendous’ to ‘excellent’,” one lithium sales executive told MarketWatch. Analysts told the site that the lagging demand is due to high interest rates worldwide that have rattled the automobile industry, and “EVs are not immune.” EV price parity with gas-powered vehicles was originally expected by 2025, according to The Guardian, but COVID-induced factory closures and supply-chain lags delayed that timeline. Responding to consumer demands, auto giants like Ford and GM have also delayed plans to introduce new EV models, leading to an oversupply of lithium, according to the Global Automotive Trade Network, a Chinese analytics site on car markets.

Low lithium prices fueling Chinese EV ‘price war’

With China’s year-on-year demand for EVs decreasing, Chinese EV makers are currently engaging in a “price war” to entice new customers, and low lithium prices means automakers have even more flexibility to slash price tags, according to Chinese news site Car Quiz. But the intense competition between more than a dozen EV-makers means that the market is now too saturated and only a handful of companies can meet or exceed sales targets, and analysts predict that 2024 could see smaller Chinese EV companies tank, Semafor previously reported. Still, the record-breaking performance by larger companies like China’s BYD — now the world’s largest EV producer — has Tesla’s Elon Musk worried that Chinese EV makers will ”pretty much demolish most other companies in the world” without trade barriers.

Argentine federalism complicates Milei's lithium ambitions

As part of Argentina’s economic recovery plan, newly-elected President Javier Milei has proposed boosting exports of the country’s vast lithium reserves — Argentina is estimated to be the fourth-largest lithium producer in the world. Musk and other EV executives are reportedly ”extremely interested" in Argentine lithium, Milei has told reporters. But according to the Argentine constitution, provinces — and not the federal government — are entitled to ownership of natural resources, and Milei’s political rivals have vowed to stop him from exploiting lithium, reported La Nación. “He’ll have to come at me with the army,” said the governor of Argentina’s largest mining province.