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China's Lithium Industry Faces Slowdown as EV Prices Plunge

Published: 3.19.2024

The Chinese lithium mining sector is experiencing a significant slowdown due to plummeting prices of the essential metal, vital for electric vehicle (EV) batteries. This decline, attributed to softening EV demand globally, has prompted a re-evaluation of production growth strategies and new project plans within China. 

The price of lithium has dropped drastically over the past year, with Benchmark Mineral Intelligence reporting a more than 80% plunge in its tracked basket. This downturn has led to production shutdowns and job cuts worldwide. 

In China, a major player in global lithium production, the mining of lepidolite—a hard rock ore used for lithium extraction—is particularly affected. Lepidolite mining, known for its costly extraction process, is becoming increasingly unsustainable amid the prolonged price slump. 

According to analysts, the production of lepidolite is significantly more expensive compared to other lithium sources like brines in South America. The high production costs, coupled with softer EV demand and oversupply, have rendered lepidolite mining economically challenging in China. 

As a result of these factors, industry forecasts for China's lithium output growth have been revised downwards. While the demand for lithium remains significant, especially with the global shift towards electric vehicles, the current market conditions are forcing industry players to reassess their strategies. 

Despite the challenges, there remains optimism about the long-term prospects of the lithium industry in China. Government initiatives to boost domestic mining and reduce reliance on imports indicate a commitment to the sector's growth. 

However, in the face of ongoing price pressures and market uncertainties, stakeholders are exploring strategies to adapt and maintain stability. Li Liangbinchairman of Ganfeng Lithium, highlights the potential role of lepidolite in balancing supply and demand dynamics, despite its higher costs. 

While the short-term outlook may be subdued, the long-term prospects remain promising as the global transition towards electric mobility continues to drive demand for this essential metal. 

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