Lithium gets a charge, but oversupply still looms

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Subscribe to enjoy similar stories. Lithium may be called “white gold," but investing in the metal has hardly been a golden ticket lately. Lithium, which is used to make batteries for both gadgets and electric vehicles, has been on a roller-coaster ride in recent years.

Its price skyrocketed in 2021 and 2022, only for a subsequent plunge to wipe out all those gains. Lithium prices are now down nearly 90% from their peak in 2022. Rising adoption of EVs, especially in China, has pushed up demand, but supply has been ramping up even faster.

That, together with slowing EV sales outside of China, has pushed lithium prices down. No wonder investors got excited when there were unconfirmed reports last week that China’s battery giant Contemporary Amperex Technology, or CATL, suspended production at one of its lithium mines. UBS said the mine represented around 5% of global supply.

According to domestic Chinese media, CATL didn’t confirm the suspension but did say that it is making adjustments to its production. Lithium futures traded in China have risen around 4% since the reports last week while shares of lithium miners around the world have also surged. U.S.-based Albemarle has jumped 14% while Australia’s Pilbara Minerals has gained 19%.

Their stocks are still way down from their peaks in 2022. With prices having dropped so low, supply cuts seem inevitable as producers are making little profits or even losses. UBS, for example, estimated that current lithium prices are already lower than CATL’s cash cost for production.