Chile Braces for Global Lithium Surplus in 2024

Chile's mining agency, Cochilco, has projected a significant global surplus of lithium for the years 2024 and 2025, despite recent production cutbacks by lithium companies due to declining prices. This anticipated surplus is expected to impact the market dynamics for lithium, a crucial component in electric vehicle batteries.

Key Takeaways

• Chile is the second-largest lithium producer globally, with major companies like Albemarle and SQM operating in the region.
• A surplus of 89,000 tons of lithium is expected in 2024, increasing to 141,000 tons in 2025.
• Lithium prices have plummeted by as much as 78% over the past year, prompting companies to reduce production.
• Other countries, including Zimbabwe and Argentina, are expected to increase their lithium production significantly in the coming years.

Overview of Lithium Production in Chile

Chile's lithium production is projected to reach approximately 285,000 metric tons of lithium carbonate equivalent (LCE) in 2024, with an increase to 305,000 tons in 2025. The country remains a key player in the global lithium market, which is essential for the growing electric vehicle industry.

Market Dynamics and Price Trends

The report from Cochilco indicates that the lithium market is currently experiencing a surplus due to a combination of factors:

• Production Cutbacks: Companies have responded to low prices by scaling back production, which has tightened supply forecasts.
• Price Decline: Lithium prices have seen a dramatic decrease, leading to a potential market rebalancing by 2027-2028.
• Future Projections: The agency anticipates that supply and demand will stabilize by 2027, as new projects come online and production increases.

Global Lithium Landscape

While Chile continues to be a dominant force in lithium production, other countries are emerging as significant players:

1. Zimbabwe: Expected to produce 75,000 tons in 2024, accounting for about 6% of the global supply.
2. Argentina: Forecasted to produce over 100,000 tons by 2026, driven by new investments and projects.
3. Mali and Congo: Anticipated to increase production substantially in the coming years.

Risks and Uncertainties

Cochilco has highlighted several risks that could affect the lithium market:

• Political Factors: The recent election of US President Donald Trump has raised concerns about potential import tariffs that could impact global trade and growth.
• Dependence on China: The heavy reliance on lithium consumption in China, coupled with ongoing trade disputes with the US and EU, adds further uncertainty to price stability.

Conclusion

As Chile prepares for a global lithium surplus in 2024, the dynamics of the lithium market are shifting. With production cutbacks and fluctuating prices, the landscape is evolving, and other nations are poised to play a more significant role in the global supply chain. The coming years will be crucial for stakeholders in the lithium industry as they navigate these changes and prepare for a more balanced market by 2027.

Sources

• Chile’s mining agency expects another global lithium surplus this year | Kitco News, KITCO.