Lithium is one of the most important metals to complete the energy transition and develop a fleet of electric cars. It is the main component used to manufacture electric batteries, and as such, demand has contributed to making it one of the main protagonists in recent years. The supply of lithium has become a strategic issue for many countries, and the search for new sources of the metal has given very positive results to China in recent weeks: the country has just found one of the largest known deposits, and becomes thus, the second largest holder of proven lithium reserves in the world, only behind Chile. The new Chinese source will make the country go from having 6% of the known world reserves to having 16.5%, a giant leap. The growth and development of new supply is being enough to keep metal prices low, after suffering a drop of more than 20% in 2024.
Last week, Chinese public media published a finding that could redefine the global lithium market: China had managed to increase its proven lithium reserves, from 6% of the world’s total, to 16.5%, a jump that places it as the second country in the world with the largest amount of extractable lithium on the entire planet, only behind Chile.
The figures of the discovery are enormous: in a belt 2,800 kilometers long, enough reserves of lithium would have been found to extract between 6.5 and 30 million tons of the metal, a huge percentage of the world total, which the US government estimates At the end of 2024, it will be around 105 million tons. The new supply represents a boost for the country that demands the most lithium on the planet, at a time when it has become the spearhead of the transition to electric cars around the world. Thus, the discovery will help China become less dependent on foreign lithium.
According to data collected by the United States Geological Survey Office, Chile closed the year 2024 as the main country in the world for proven lithium reserves, that is, deposits that are proven to be economically exploitable with the technologies and methods in force. . Chile has 9.3 million tons of lithium in these reserves and, until China’s discovery, Australia remained in second place, with 6.2 million tons, and Argentina in third, with 3.6 million tons. China was the fourth country in this regard, with 3 million tons in its reserves.
Now, China becomes the second most important country on the planet in this sense, and disputes the king of lithium, Chile, for the future of the production of this metal. According to figures managed by the US government, Chile has 11 million tons of resources (oil reserves that have been found, but are not necessarily economically viable at this time). If the new Chinese deposit confirms all the potential that the authorities have indicated, it will make the Asian country the most important on the planet in terms of resources.exceeding for the first time the 22 million tons that are calculated for the territory of Argentina, an amount that doubles that of Chile, but which is not effective at this time, since most of it could not yet be extracted profitably.
The increase in China’s proven reserves is also related to improvements in extraction techniques used in sources such as saline lakes or lithium-bearing mineral micas. The improvement in these techniques is allowing the volume of lithium contained in the country’s proven reserves to increase, leading China to become the third largest producer of lithium in saline lakes around the world, behind the so-called “lithium triangle.” ” in South America, and the western part of the United States.
Prices fall due to the wave of supply
The lithium fever has generated a significant increase in volatility in metal prices in recent years. Due to the increase in demand that was initially generated by the push for the electric car, metal prices began to skyrocket in mid-2022, going from around 100,000 yuan per ton in China to almost 600,000 yuan at the end of 2022, a figure that ended up attracting investments in new lithium production.
From that point on, the projected increase in lithium production has convinced the markets that it is a well-supplied market, and metal prices have sunk in a few years, closing 2023 at around $100,000. the ton again. In 2024 this downward trend continued, with a drop of more than 20% that has taken prices to the 75,000 yuan per ton that are currently being paid in Chinese markets.
“Lithium has seen a glut of new supply and a slowdown in demand for electric vehicles,” explains ben Laidler, global markets strategist at eToro. “A price reversal may be slow, and miners are under pressure, with lithium prices still above pre-2022 levels and above the industry’s cost curve,” Laidler notes.
In his opinion, “the excess supply will deepen this year, and will be equal to more than 15% of the market with this new supply, while there is a lower-than-expected growth in demand for batteries,” highlights the expert.
The decline in lithium prices has spread to those who pay for batteries that use it as raw material, and it has been two consecutive years, according to analysts from Bloomberg Economicsof decreases in the prices of these components. According to the agency’s experts, in 2025 the drop in prices will continue, but it will do so at a less pronounced rate than in the last two years, due to “trade tensions and metal prices,” they indicate.
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