Financial news app Zhitong learned that lithium industry observers had hoped that battery metal prices would rebound from a significant decline. However, the recent decline in lithium prices this month and the continuous low demand for electric vehicles has dealt a considerable blow to the market. It is understood that spot lithium carbonate prices in China have fallen to the lowest point since August 2021, and the most active futures contracts on the Guangzhou Exchange have fallen 12% this month. Albemarle (ALB.US) bid in an auction on June 19 at a 6.9% lower price than the previous auction on June 5.

In 2023, due to oversupply and slowing demand growth, lithium prices plummeted more than 80%. Although the price briefly stabilized at the beginning of the year, the market is still working to digest inventory and customers are postponing purchases. The bearish sentiment has severely impacted the stock prices of producers such as Albemarle and Piedmont Lithium (PLL.US).

Susan Zou, an analyst at Rystad Energy, pointed out that the increase in lithium production and the expected summer off-season are putting pressure on prices. Although the price briefly rebounded due to reduced supply during the Chinese lunar new year holiday and speculative purchases by traders, the upward momentum has largely disappeared.

Traders revealed that manufacturers have been cutting lithium product orders to cope with slowing growth in electric vehicle demand, and are expected to replenish inventory at lower prices soon. However, some traders believe that there is limited downward space for prices, and the current price decline has already squeezed the profits of some high-cost producers. The lowest contract price in Guangzhou in July suggests that prices may hit bottom in the summer.

Data from Citigroup shows that total inventory of Chinese lithium carbonate has been rising steadily since April. Last week, downstream firms (mainly cathode manufacturers) increased their inventory by 8% compared to the second week, while other users, including battery manufacturers and traders, saw their inventory soar by 32%.

Lithium producers' stock prices are also under pressure. Some of the largest automakers in the world, including Ford, General Motors, and Tesla, have recently abandoned their electric vehicle plans, leading to a decline in investor confidence in raw material suppliers and mining companies. Albemarle's stock price has fallen 23% as of June, and its decline since the beginning of the year has reached 34%. Lithium Americas (LAC.US), a potential supplier to General Motors, saw its stock price plummet 55% this year, and its stock offering in April was sold at a significant discount. Piedmont Lithium (PLL.US), which has signed a supply agreement with Tesla, fell 64% during 2024.

Chris Berry, president of consulting firm House Mountain Partners, said that investors are willing to miss the initial uptick as long as the company can ensure there are customers, customers will pay, and most importantly, the company is producing materials.

However, Quentin Lamarche, joint managing director of Techmet-Mercruia, pointed out that the low sentiment of stock market investors reflects Wall Street's short-term impatience, but energy companies' long-term patient capital has not been hindered by the price collapse. They are bullish on the development of faster direct lithium extraction technology.

Although lithium prices have raised concerns, some large companies are still active in trading. Equinor ASA announced in May that it will purchase 45% of the shares of two lithium project companies in Arkansas and Texas from Standard Lithium Ltd. In early June, Occidental Petroleum Corporation and a subsidiary of Berkshire Hathaway Energy formed a joint venture to commercialize the technology of extracting and producing lithium compounds from California brine.

Although Bloomberg New Energy Finance has lowered its sales expectations for battery electric vehicles in 2026 in its annual Electric Vehicle Outlook, it still predicts that the overall demand for lithium from batteries will reach just under 3.5 million tons in 2035, nearly three times the level in 2024. Lamarche said of the world's transition to electric vehicles, "We are experiencing the development of the S curve, and although we are suffering the consequences, the transformation train has started."