Citi slashes lithium price forecast by 40% on lower demand

Citigroup has reduced its lithium price predictions for the upcoming two years by up to 40%, attributing the decline to slower battery demand growth and heightened trade uncertainties. The bank has lowered its lithium carbonate and hydroxide price forecasts to $12,000 per tonne from $20,000 and $17,000 respectively, as well as its spodumene outlook from $2,000 to $1,200 per tonne.

Citi's reasoning behind the downgrade includes the expectation of improved supply by 2027 and elevated uncertainty surrounding next year's demand, which could lead consumers to postpone purchases and keep inventories low. The bank also noted that sentiment and positioning are likely to be primary factors influencing the market in the near term.

The downgrade comes as several lithium projects and investments kick off, such as Rio Tinto's two new operations in Catamarca, Argentina. With increased supply, the bank anticipates market balance and a surplus for the next few years as demand slows. The Chinese market has been putting pressure on lithium prices, with the most-active lithium carbonate contract on the Guangzhou Futures Exchange surging 1.2% to 91,160 yuan ($13,710) per ton on Monday.

The price has dropped over 40% since the end of August. Chinese lithium carbonate futures prices have been falling for the past ten months, particularly after an agreement with the European Union to limit hybrid car exports has raised concerns over demand prospects for the electric vehicle battery material.

Although the short-term outlook for lithium is dim, consumption is expected to triple by 2050, driven by electric vehicles and energy storage systems. This long-term growth presents a challenge for the mining industry, as substantial additional capacity will need to be brought online to meet future demand. The scale of this challenge is significant, with the industry potentially requiring 134 new lithium mines and around $100 billion in investment to satisfy projected requirements. This creates a stark contrast between today's weaker prices and tomorrow's supply needs.