Key ingredient in batteries down more than 65 per cent after two-year rally
The significant drop in lithium prices since the beginning of the year could mean cheaper electric vehicles (EVs) down the road.
After soaring for two years, the price of lithium carbonate — a key ingredient in EV batteries — sank by more than 65 per cent since January, according to Benchmark Mineral Intelligence.
"Prices peaked at over $85,000 US in November," mining industry analyst Jean-Charles Cachon said, a level he deemed "unsustainable." Today, one metric tonne of the battery-grade lithium salt sells for less than $30,000 US.
He points to China removing its subsidies for electric cars, which led to sluggish sales and reduced appetite for that greener alternative.
"Chinese demand crashed in January of this year, which caused that kind of panic where prices that were more than tenfold the cost of production fell dramatically," Cachon said.
And it's not just lithium: other metals that go into batteries, such as cobalt and nickel, are also seeing their prices slide.
Daniel Breton, CEO of Electric Mobility Canada, an organization that aims to speed up EV adoption across the country, says this downturn could be good news for consumers.
"We'll see more and more electric vehicles selling for $25,000 to $40,000 as the cost of critical minerals falls, but also as battery production becomes more ingrained in the industry," he said.
Mining industry not too concerned
Meanwhile, mining companies globally are seeing their profit margins squeezed by the lower prices.
The Quebec Mining Association says the sector is "used to the ups and downs" in mineral prices.
"It may turn off some investors, but those who know how to read markets and predict future demand, I don't think that will scare them off," CEO Josée Méthot said.
Indeed, some mining companies saw their shares retreat in recent weeks due to the downward trend in prices.
Trevor Walker, chief executive of Sudbury-based junior miner Frontier Lithium, says it's "nothing that has us too concerned at this point in time."
He says production of lithium salts only costs around $9,000 to $10,000 US per metric tonne, far below current market prices.
"There's some fear in the market, and softening in prices. The reality is it remains very profitable for current producers," he said.
While it may still be a bumpy ride, battery-grade mineral prices remain high enough to motivate industry players, big and small, to move forward with new projects. According to the federal government, Canada currently has about 3.2 million tonnes of lithium oxides at its various deposits.
Walker foresees demand for lithium salts to grow as Ontario's auto sector starts making electric vehicles and their batteries in the coming years. His company is still in pre-production stages, but hopes to supply car manufacturers.
"We're positioned extremely well to provide great opportunity for northerners, and really bridge the north supply to south manufacturing," he said.
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