The culprit is the prospect of slower EV sales in the coming months, which could blow back through the supply chain to raw materials. EV registrations plunged by more than a fifth in October from the prior month, data on Friday showed.“It’s likely for lithium prices to face some small correction until early next year,” said Susan Zou, Shanghai-based analyst at Rystad Energy. “Battery makers need to destock while EV manufacturers are about to meet their annual targets.
Lithium prices in China have about tripled over the past year, according to data from Asian Metal Inc., and rallied more than 1,200% since 2020 as supply struggles to match rampant demand. “We see the near-term lithium market remaining tight, supporting lithium prices,” analysts at Morgan Stanley wrote in a note Thursday. “However, we note that there is likely to be some price pullback when underlying demand for EVs starts to weaken sequentially, and industry players may become more cautious about placing orders and building inventory.
“Whether the downturn in lithium prices remains sustainable would hinge on whether consumers would ultimately foot the bill of higher priced EVs,” said Keith Tan, associate regional pricing director for Asia metals at S&P Global Commodity Insights. “With government subsidies on EVs out of the picture next year, some in the industry think that the odds are stacked against further gains.
“Overall fundamentals will support lithium prices to stay comparatively elevated in the next three to six months, as long as global economic growth can help maintain healthy EV demand next year,” Rystad Energy’s Zou added.