Australia, a significant player in the lithium market, predicts a continued decline in lithium prices, attributing it to the rise in supply, diminishing Chinese demand, and a stagnant U.S. electric vehicle sector. According to a recent analysis by Australia’s Department of Industry, Science and Resources, lithium prices are not anticipated to rebound to the peak levels witnessed in 2022 and early 2023 until 2025.

The country, which accounted for approximately half of the world’s lithium production in 2022, forecasts a drop in the spot price of spodumene from last year’s estimated average of $3,840 per metric ton to $2,200 per metric ton in 2025.

The report also projects a surge in spodumene production, with an expected increase to 633,000 metric tons in 2025 from 386,000 tons in 2022 in Australia. Similarly, China and Chile are projected to witness substantial growth in their spodumene output over the same period.

The anticipated decrease in spot lithium prices could potentially lead to a reduction in the cost of electric vehicles and batteries. However, the flip side is that it might negatively impact investment in projects and impede consumer acceptance.

Despite these projections, Janus Henderson Investors remains optimistic about the future of lithium. The firm places its bet on lithium as one of its top commodity selections for 2024, indicating a belief that the decline in lithium prices is nearing its nadir.

According to Daniel Sullivan, the head of global natural resources at Janus Henderson Investors, the lithium market is expected to stabilize in the early part of this year, setting the stage for a potential rebound. Sullivan additionally anticipates an increase in M&A activity in the lithium mining sector, particularly in Australia, citing a significant upsurge in announced M&A deals in the country’s lithium mining sector in 2023 compared to the previous year.

Potentially impacted stocks include Albemarle (NYSE:ALB), Sociedad Quimica y Minera (NYSE:SQM), Arcadium Lithium (ALTM), Piedmont Lithium (PLL), Lithium Americas (LAC), Standard Lithium (SLI), Sigma Lithium (SGML), Ioneer (IONR).

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