Can the Lithium Market Overcome Falling Prices and Weak Demand in 2024?

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Can the Lithium Market Overcome Falling Prices and Weak Demand in 2024?

The lithium market has entered a period of price decline, mainly because of weaker demand conditions and an oversupply of lithium carbonate in key regions.

In October, seaborne lithium carbonate prices for Asia dropped by 3.8%, hovering around $10,000 per metric ton, according to S&P Global Commodity Insights analysis. 

seaborne China lithium price

The price dip reflects the seasonal winding down of demand typically seen at the end of the year when electric vehicle (EV) manufacturers prepare for a slowdown in post-peak sales. While September saw relative price stability, October’s downward shift reveals how the supply chain dynamics are pressing lithium markets. This is especially true in China’s case, which has been the dominant player in global EV sales in 2024. 

  • The slowdown underscores the lithium market’s key issue: maintaining demand growth and stabilizing prices amid fluctuating EV sales patterns.

China’s lithium market, the largest globally, saw prices fall by 3.3% in October, settling at about 73,000 yuan per ton. While a brief rebound was observed toward the end of the month, prices continue to reflect the underlying pressures of oversupply. This surplus is compounded by high inventories and the slower-than-expected uptake in EV markets outside of China. 

The global market’s current inability to absorb excess supply effectively sets the tone for a persistent price slump, possibly extending into the next several years.

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Li-FT Power Ltd. (TSXV: LIFT) recently announced its first-ever National Instrument 43-101 (NI 43-101) compliant mineral resource estimate (MRE) for the Yellowknife Lithium Project (YLP), located in the Northwest Territories, Canada.

An Initial Mineral Resource of 50.4 Million Tonnes at Yellowknife.

This maiden estimate is a major milestone for the company and marks a significant step forward in the project’s development. Li-FT Power’s upcoming mineral resource is expected to further solidify Yellowknife as one of North America’s largest hard rock lithium resources.

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Strategic Adjustments Among Lithium Producers

In response to these challenges, major lithium producers are taking action to manage costs and production levels. 

Companies like Sinomine Resource Group have opted to cut production in higher-cost regions. In Zimbabwe, for instance, Sinomine has minimized its petalite mining operations to prioritize spodumene extraction, which has a lower production cost. This shift reflects a broader industry trend, where companies focus on streamlining their operations to protect profit margins as market prices dip. 

Another significant strategic move within the industry was the recent acquisition of Arcadium Lithium by Rio Tinto. It is a substantial shift in the company’s approach to the lithium sector. This acquisition is particularly important for Rio Tinto as it extends the company’s footprint in lithium production beyond its existing projects in Serbia and Argentina, allowing it to target markets outside of China more effectively.

One of Arcadium’s main competitive advantages lies in its exploration of direct lithium extraction (DLE) technology. DLE can revolutionize the lithium market by unlocking reserves in brine deposits previously considered difficult to exploit using traditional methods. 

Presently, there are 13 DLE projects in operation, with total output projected to reach about 124,000 tonnes in 2024. According to Benchmark’s data, DLE technology can account for 14% of the global lithium supply by 2035, producing around 470,000 tonnes of LCE. This growth underscores the increasing role of DLE in meeting lithium demand for battery and EV markets.

Direct lithium extraction forecast

Global Investments and Expanding Lithium Supply Chain

Investments in lithium production continue to grow despite the current market downturn, which signals optimism about long-term demand. 

In October, General Motors made a notable move by increasing its stake in the Lithium Nevada project to 38% with an additional $625 million investment. This initiative speaks of a long-term commitment to secure local lithium supplies. It aligns with the U.S. government’s strategic push to strengthen domestic EV battery production and reduce reliance on imports. 

The U.S. Department of Energy has already extended a substantial loan of $2.26 billion to support phase 1 construction of this project. The figure reveals the critical importance of domestic lithium resources for national energy goals. 

While traditional methods dominate current production, the lithium market is also increasingly exploring technological advancements. General Motors and other industry stakeholders are actively pursuing direct extraction methods to unlock challenging lithium deposits. 

By experimenting with DLE, the U.S.-based Lithium Nevada project aims to reduce environmental impacts and shorten production timelines. These technological investments indicate that despite current pricing challenges, there’s confidence in lithium’s long-term demand potential. More so as EV adoption grows and global green energy transitions accelerate.

Long-Term Market Forecast and Expected Price Recovery

Looking ahead, lithium prices could remain in a tight range. S&P Global Commodity Insight’s forecasts suggest that the price of lithium carbonate will stay between $9,924 and $11,627 per metric ton until 2026. This projection reflects the industry’s cautious outlook as companies expect that demand growth will take time to balance the current surplus. 

  • Analysts predict that a substantial price recovery may not materialize until 2028, with a forecasted rise to $14,659 per metric ton, or about a 20.8% increase, as the market finally shifts into a deficit.

lithium price forecast S&P Global

The expected long-term supply shortage is largely tied to the anticipated increase in EV adoption and the renewable energy transition. Both of these demand drivers require significant lithium resources. 

However, automakers worldwide are adjusting their production strategies to balance profitability with sustainable growth. This brings uncertainty to the exact timing of the demand shift that will absorb today’s excess supply.

In summary, the lithium market in 2024 reflects a complex blend of challenges and opportunities. Prices remain low due to oversupply and fluctuating EV demand, especially outside of China, but the long-term outlook for lithium still holds promise.

The lithium industry’s ability to adapt to today’s market conditions will shape the future landscape of this essential resource, ensuring its place in the global shift toward a sustainable energy future.

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Bank Of America Flags Liquidity Challenges in Carbon Markets: Will COP29 Usher in a New Era of Climate Finance?

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cop29

This year’s COP29 summit will take place in Baku, Azerbaijan, from November 11-22. The focus will primarily be on delivering stronger climate finance and advancing a global carbon trading framework.

Interestingly, Bloomberg reported that Bank of America (BofA) has flagged liquidity concerns in carbon markets. It has highlighted the need for transparent and reliable trading standards, which is one of the key agendas of COP29. This is also a consequence of negotiators planning to change the dynamics of the carbon credit market in the future.

Here’s an in-depth look at what’s on the agenda for COP29 and why it matters.

COP29: Setting a New Climate Finance Target

For the first time since 2009, countries will meet at COP29 to reassess the funds required for climate action from developing countries. The decision will create a New Collective Quantified Goal (NCQG) for climate financing, which will replace the earlier fixed target of $100 billion per annum.

The NCQG aims to build the capacity of vulnerable nations to develop climate resilience and transition to low-carbon growth while protecting their communities from worsening climate impacts.

It’s already palpable that rising temperatures, extreme weather events, and increased costs for adaptation are imposing tremendous stress on developing countries. And this reassessment comes as a blessing during such inclement times.

Once there is mutual agreement on these issues, it will lay the foundation for carbon trading. This standardization will tackle liquidity challenges and broaden access to this facility for both developing and developed nations.

Bank of America Weighs in on Article 6.4 for the Future Carbon Credit Market

Article 6 of the Paris Agreement is another “high-stakes” topic to be discussed in COP29. Under this provision, countries are permitted to trade carbon credits with one another. Therefore, countries can meet their climate goals by investing in reducing emissions elsewhere.

For instance, a country rich in forest cover can sell credits generated from protecting its forests to fund its conservation efforts. The purchasing countries can then count these reductions toward their climate targets.

Negotiators are highly focused on Article 6.4, which sets up a new platform to harmonize carbon credit trading.

Abyd Karmali, Managing Director of ESG & Sustainable Finance at Bank of America, stated that Article 6.4 is vital for the future of the carbon credit market. He noted that this is a critical market and clear, legally binding standards are essential to ensure the carbon market supports emissions reduction goals.

Karmali is also an esteemed delegate who will be monitoring talks at the COP29 climate summit.

International carbon trading under Article 6, unlike the voluntary carbon market (VCM), will be subject to strict international oversight. These standards will help avoid some of the fraud and “greenwashing” charges that have plagued the voluntary markets and create a better and more trustworthy system for trading emissions reductions.

BloombergNEF’s Take on Carbon Trading

BloombergNEF has pointed out that new standards for carbon credits have boosted efforts to establish a global carbon trading system under the United Nations. However, these new guidelines seem to be weaker than the existing ones.

Even if they receive approval at the upcoming international climate summit in November, significant work remains to fully implement a mechanism that was first proposed in Article 6.4 of the 2015 Paris Agreement. However, experts hope that international standards can revitalize carbon trading and draw companies and governments away from the troubled VCM.

Layla Khanfar, a research associate at BloombergNEF, believes Article 6.4’s potential impact could be significant. She said,

“A finalized deal could lead to supply standardization and improve global liquidity. These are both valuable stepping stones towards a carbon credit market BNEF estimates could be valued at over $1 trillion by 2050.”

Voluntary Carbon Market’s Liquidity Problem

This leaves the VCM itself, in which nearly all corporations currently buy credits to offset their emissions, in deep trouble regarding liquidity.

We discovered from the same Bloomberg report that BofA has approached this market cautiously, citing low trading volumes and persistent accusations of greenwashing. These claims have eroded its credibility. According to MSCI, VCM volumes fell more than 20% last year, dropping to about $1 billion in trades.

Top companies such as Volkswagen, Telstra, and TotalEnergies have utilized the VCM as a method of balancing their emissions.

However, Karmali has said that “there’s simply not enough liquidity” to sustain it as a viable climate tool. He added that over the last two years, the market has experienced a steep decline, making it very difficult for participants to operate within the current systems.

The Transparency Milestone at COP29

COP29 marks the first full implementation of the enhanced transparency framework of the Paris Agreement. In this agreement, countries will have to submit their inaugural biennial transparency reports (BTRs) by the end of the year. These reports will contain details of their climate actions, including emissions reductions, adaptation strategies, and climate finance flows.

Subsequently, the Azerbaijani presidency launched the Baku Global Climate Transparency Platform to support this initiative. Notably, this platform particularly helps countries who are less familiar with climate reporting.

Transparent reporting will hold countries accountable and serve as a reliable resource for policymakers and stakeholders. The information in BTRs will be crucial for evaluating national climate commitments and identifying gaps in global action.

We expect COP29 will present an outstanding opportunity for a more sustainable and resilient future. Major emitters are stepping up with strong commitments, and financial institutions like Bank of America are backing these efforts. By encouraging collaboration and transparency, COP29 has all the potential to drive meaningful progress in carbon markets and climate finance.

Sources:

  1. BofA Calls Out Liquidity Barriers as Bankers Await CO2 Deal – BNN Bloomberg
  2. What to Expect at the 2024 UN Climate Summit (COP29) | World Resources Institute

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Nickel Market is Changing Big Time: Is a Supply-Demand Shift Underway?

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Nickel Market is Shifting Big Time, Here are The Major Changes to Know

Nickel, a key component in electric vehicle (EV) batteries and stainless steel, is experiencing significant changes in supply dynamics and pricing. Recent activities by Nickel Industries and market reactions to global economic conditions paint a picture of both challenges and opportunities in the nickel sector.

Nickel Industries Strategic Moves in Indonesia

Nickel Industries, an Australian company, could become one of the largest nickel resource holders in the world with its strategic acquisitions in Indonesia. 

In August 2024, the company signed agreements to purchase the Sampala project and secured a 51% stake in the Siduarsi project. These moves come amid a severe nickel ore shortage in Indonesia. This has led to a staggering 45% rise in local nickel prices since late 2023. 

According to Justin Werner, Managing Director of Nickel Industries, this acquisition is crucial for mitigating the impact of ore shortages and the high prices associated with them.

The Sampala project boasts a significant resource of 2.3 million metric tons of contained nickel metal, along with 200,000 metric tons of cobalt. Werner expects this resource to expand dramatically, potentially reaching up to 10 million metric tons of nickel metal. Once that happens, it will be among the top five known nickel resources globally. 

With plans to commence shipping ore by the end of 2025, Nickel Industries aims to ensure a self-sufficient ore supply for its operations in the Morowali Industrial Park.

In addition, the Siduarsi project has revealed an initial resource of 52 million dry metric tons at a promising nickel grade of 1.1%. This resource is anticipated to grow, and there are projections that the total contained nickel could double. Nickel Industries’ strong position in Indonesia positions it as a key player in the global nickel market.

Global Price Shifts and Market Impact 

While Nickel Industries is making headlines with its acquisitions, broader market trends are affecting nickel prices globally. 

  • The London Metal Exchange (LME) recently reported that nickel prices fell to $15,873 per metric ton by the end of October 2024. This decline followed a brief surge to a four-month high of $18,153 per ton earlier in the month. 

The drop was largely attributed to a lack of investor enthusiasm following China’s recent stimulus measures, which did not meet expectations for more aggressive economic support.

China is the world’s largest consumer of industrial metals, and its economic health is vital for nickel prices. After the Chinese central bank announced its stimulus package on September 24, 2024, investor confidence briefly increased, leading to higher nickel prices. 

However, as details of the package emerged and manufacturing activity in China remained weak, investor sentiment shifted, causing prices to retreat.

Data from S&P Global Commodity Insights maps in detail major market events impacting LME 3M nickel prices shown below.

nickel prices LME 3M drops

Adding to this volatility, stocks of Russia-origin nickel in LME warehouses increased significantly, rising 19.6% month over month, per S&P Global analysis. 

This surge in inventory occurs despite an LME ban on new deliveries from Russia in response to geopolitical tensions. As a result, a mix of increased nickel stocks and reduced investor confidence has put downward pressure on LME nickel prices.

Indonesia’s Production Strategy in Focus

Indonesia remains a pivotal player in the global nickel landscape. The country’s energy and mineral resources minister indicated that the government plans to regulate nickel ore production to maintain a balance between supply and demand. 

Such strategy is particularly important given the challenges posed by a new domestic mining approval system that has led some producers to import nickel ore from the Philippines, the second-largest nickel producer.

Interestingly, despite the tight supply situation, Indonesia’s primary nickel output increased by 14.5% year-over-year during the first eight months of 2024. The largest nickel producer is also trying to shift away from China-based ownership to qualify for the U.S. Inflation Reduction Act of 2022.

Indonesia primary nickel output growth 2024

This trend highlights the country’s potential to drive global nickel production growth. As Indonesia continues to manage its production levels carefully, it can maintain its status as a leading supplier in the nickel market.

How Do Future Nickel Prices Look Like?

Looking ahead, S&P Global analysts have revised their price forecasts for nickel. Following the October price fluctuations, the forecast for the LME nickel price in the December quarter has been upgraded to $16,583 per ton. This reflects a decline compared to the previous year.

Nevertheless, ongoing discussions in China about issuing significant amounts of debt to stimulate growth could improve investor sentiment and support nickel prices in the near future.

Projections show a surplus in the global primary nickel output over the next four years, growing annually at almost 6%. Yet, Indonesia’s evolving mining policies and production strategies introduce uncertainties that could affect this outlook. 

Global primary nickel output forecast
Chart from S&P Global Commodity Insights

The recent developments in both Nickel Industries and the broader nickel market underscore the dynamic nature of this essential metal industry. The future of nickel will depend not only on local production strategies in Indonesia but also on global economic conditions and investor confidence.

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VCM Demand Surge: 147 Million Credits in 2024 Retired Amid Tightening Supply

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VCM Demand Surge, 147 Million Credits in 2024 Retired Amid Tightening Supply

A new report from Viridios AI, a provider of carbon credit pricing and data, offers valuable insights into the current landscape of the voluntary carbon market (VCM). It shows the VCM experienced relatively low trading activity, with notable fluctuations in the prices of specific projects.

However, year-to-date retirements in 2024 reveal strong demand for carbon credits and they’ve exceeded those in the same period in 2023. We highlight the key insights below that may have a huge impact on the VCM’s future.

Demand Outpaces Supply With Record Carbon Credit Retirements

Viridios AI used data from the four major carbon registries in generating the graphs:

  • Verra,
  • Gold Standard,
  • American Carbon Registry, and
  • Climate Action Reserve.

As of now, 2024 year-to-date retirements have surpassed those in the same period in 2023, with a remarkable 147 million credits retired from the largest registries. 

carbon credit retirements cumulative per month Viridios AI

quarterly carbon credit retirements Viridios AI
Charts from Viridios AI

As seen in the first chart above, monthly cumulative carbon credit retirements keep on growing, with the recent month surpassing both the 2022 and 2023 results. Similarly, quarterly credit retirements in 2024 (second chart) exceeded those in the same period last year. 

This trend highlights a growing commitment among companies and organizations to offset their carbon footprints. It also reflects a robust demand for carbon credits in the face of increasing regulatory pressures and climate goals.

In contrast, the market shows signs of shifting from oversupply toward a tightening of inventory with a slowing growth rate. 

The graph reveals that monthly cumulative credit issuances, or credit supply, in 2024 are still growing. However, the amount (in metric tonnes) of issuances this year has significantly dropped compared to last year and even so since 2022. 

monthly Cumulative carbon Credits Issuances Viridios AI
Chart from Viridios AI

The quarterly carbon credit supply paints a different picture. While Quarters 1 and 2 have seen lower issuances in 2024 versus 2023, Q3 experienced much higher supply, with over 10 million metric tonnes compared to the same period last year. 

Quarterly Credit Issuances Viridios AI
Chart from Viridios AI

In a separate analysis, overall credit inventory has risen, but the rate of increase has slowed significantly—from 34% in 2021 to 8% in 2024 so far. 

VCM issuances, retirements and inventory growth Rich Gilmore
Source: Rich Gilmore (Carbon Growth Partners)

These changes point to a narrowing supply-demand market gap, especially as we approach the typical Q4 surge in voluntary carbon credit retirements. 

Credit Supply Challenges Loom

Supply issues are prominent, with REDD+ credit (projects including efforts to avoid deforestation and degradation) volumes declining. REDD+ credit volumes could face reductions exceeding 60% due to new methodologies like VM0048, making some projects financially unfeasible. 

Viridios AI data further suggests that the VCM experienced relatively low trading activity, with notable fluctuations in the prices of certain carbon projects.

The report shows that REDD+ credit prices in all regions, both for vintages 2018 and 2022, have been falling. The biggest retiree of REDD+ carbon credits for the last 30 days is the French energy major Engie SA. The company retired over 907 thousand metric tonnes of these credits from the Congo REDD+ project.

REDD+ carbon credit price
Chart from Viridios AI

Alternative sources, such as cookstove projects, may bridge part of the supply gap but also at reduced volumes. These projects lower carbon emissions through efficient cookstoves that release fewer pollutants and use less biomass. 

Viridios AI report reveals that prices for cookstove carbon credits are increasing in Latin America and Southeast Asia regions. On the other hand, prices in Africa for these projects have been dropping in all vintages (2018-2022). 

cookstove carbon credits price

Carbon Price Tension Ahead

The Viridios AI report on the VCM presents a complex picture of the shifting supply and demand landscape for carbon credits, highlighting trends that are likely to impact future pricing.

The key takeaway is a narrowing supply-demand gap as credit issuances slow, while retirements—reflecting demand—continue to surge. This dynamic has implications for the price stability of specific carbon credits, like those tied to REDD+ and cookstove projects.

The voluntary carbon market is increasingly used by companies to offset their emissions. However, with current low carbon credit prices discouraging new investments, the market’s capacity to meet rising demand may be limited. And with a continued strong retirement rate, this could drive prices up as supply struggles to keep pace, especially for high-quality carbon credits.

The upcoming discussions and decisions at COP29 will likely play a pivotal role in shaping the future of carbon markets, especially concerning the integration of REDD+ initiatives. Stakeholders will be watching closely as they navigate the evolving carbon market.

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