As Oversupply Deflates Lithium Bubble, IPO Market Keeps In High Spirits

The lithium market is facing persistent turmoil as spot prices have continuously declined for more than a year.

Supply shortages and speculation caused a lithium bubble in 2022, with spot prices reaching CNY 600,000 ($84,400)/ton. However, increased production and subdued Chinese demand caused the bubble to burst, with prices returning below CNY 100,000 ($14,000)/ton — levels not seen since July 2021.

Yet, the supply pressures are persisting. Chile, boasting the world’s largest reserves of lithium, is gearing up to open new extraction areas.

Bloomberg reported major players in the global battery supply chain, including Tianqi Lithium, LG Energy Solution, and French miner Eramet have engaged in discussions with Chilean authorities regarding the government’s public-private model for lithium. The country’s new lithium policy, led by President Gabriel Boric, involves the state taking a controlling stake in strategically significant lithium operations.

According to a report from the Australian Department of Industry, Science and Resources, the market can expect further declines. As one of the key lithium suppliers, Australia forecasts an increase in spodumene, a lithium-bearing mineral, from 386,000 tons in 2022 to 633,000 tons in 2025.

Now Read: Barrick Partners With Antofagasta To Prospect For Chilean Copper Amidst Tightening Global Supply

Amidst the lithium market turmoil, Core Lithium, Australia’s Northern Territory’s sole lithium miner, has announced a halt at its Finniss operations. The company cites “tough” market conditions as the reason behind this decision, revealing plans for a significant write-down on the value of its assets. Core Lithium had already suspended early works on its proposed second mine, BP33, in December due to adverse market conditions.

However, asset management firm Janus Henderson JHG sees a silver lining, considering lithium as one of its top commodity bets for 2024. Daniel Sullivan, the firm’s head of global natural resources, believed the pullback in lithium prices may be nearing a bottom. In an interview for the Wall Street Journal, he anticipated normalization in the early part of the year and an increased M&A activity in lithium mining, particularly in Australia.

The most recent news from Australia aligns with Sullivan’s expectations. Kali Metals, a lithium exploration company just listed on the Australian Securities Exchange (ASX), recorded a strong opening day, trading at A$ 0.435 — a 75% increase from its initial public offering price of A$ 0.25.

The company was spun out of Karora Resources and Kalamazoo Resources, which will remain the top two shareholders. Despite the current challenges, the oversubscribed IPO raised A$15 million, showing the market’s appetite for lithium exploration.

Also Read: As Spot Uranium Climbs To New Highs, Cameco Struggles To Regain Its Footing

Photo: Shutterstock