What’s going on here?
Lithium prices dropped 80% to hit $13,200 per tonne, unfortunate collateral damage after the electric vehicle (EV) market drove off track.
What does this mean?
The transition to green energy hinges on a few factors: world leaders prioritizing the planet over corporate profit, international nations’ ability to work together, and lithium. The precious metal is, after all, a key ingredient in an array of rechargeable batteries, including the types that fuel solar power systems and EVs. For the last couple of years, that’s kept lithium prices fairly high. But with China – the world’s biggest EV market – suffering an economic slowdown, shoppers are keeping cash in the bank. The result: demand for EVs in China inched up just 25% in 2023, a tumble from 83% the year before. So with more lithium in the market than carmakers know what to do with, the metal’s price fell 80% in the last year to reach its lowest point since 2020.
Why should I care?
For markets: The outlook’s musky.
Even OG EV maker Tesla has been feeling the pinch, continually slashing prices to coax drivers through the showroom doors. That tactic might put more of Musk’s models on the road, but it also chips away at the firm’s bottom line. And while Tesla is designing a more affordable model to attract a cost-conscious market, it won’t be ready until late 2025. So with a less-than-optimistic sales outlook and no immediate plans to drum up business, investors have sent Tesla’s shares down 16% this year already.
Zooming out: China needs the green.
Clean energy endeavors made up 40% of China’s economic growth last year, with major companies and governments investing their cash into solar power, panel manufacturing, EVs, and rechargeable batteries. That was enough to roughly offset the real estate sector’s woes, but with lithium prices and EV sales on the slide, China may have less to hide behind this year.
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