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What makes this lithium downturn different

lithium downturn

While this is not the first lithium downturn, with slumps occurring in 2014 and 2018, there’s a different air to how the cycle is behaving this time around.

“I was there in 2014, (and) I was there in 2018,” Global Lithium Resources managing director Ron Mitchell said during an investor call.

“The cycle is typically a two-year bear, and if you think about it, lithium prices peaked in the fourth quarter of 2022, so we’ve actually been in a bear market now in terms of lithium pricing de-escalating since December 2022 when we had the all-time highs.”

Alongside his role as boss of advanced exploration company Global Lithium, Mitchell also serves as chair of the London Metal Exchange lithium and cobalt committee. When the 2014 and 2018 lithium downturns occurred, he was working at Talison Lithium and Tianqi Lithium, respectively.

Mitchell said different levers have affected lithium pricing this time around, including how lithium products are traded.

“What we’ve seen throughout the course of last year was a step down in pricing; obviously accelerated more towards the back end,” he said. “But there was quite a significant adjustment to the procurement strategy in China.

“Typically, throughout the value chain, whether that’s raw materials, the chemicals side of the business, cathode or battery, (there) is normally a two-to-three-to-four-month inventory build.

“But as working capital was stretched, that model of purchasing or procurement was flipped to really a hand-to-mouth, shipment-to-shipment basis.”

Mitchell said while certain market behaviours had changed, there was a constant.

“Buyers are still buying,” he said. “They’re not reneging on contracts, so that’s a really important difference. Back in 2018, a lot of sellers had their backs to the wall. That’s not the case this time around.”

During the 2014 and 2018 downturns, end markets were more immature than they are today, with less certainty around the future of renewable technologies such as electric vehicles (EV) and battery storage.

But times have changed, with EV sales increasing across the world. This bodes well for an eventual uptick in lithium prices.

In fact, Mitchell believes we’ve “come through the floor”.

“We’ve been flatlining now for a couple of weeks in terms of the spodumene pricing, which gives me a lot of confidence that we’ve probably come through the floor,” he said.

Global Lithium is developing its Manna and Marble Bar lithium projects in Western Australia. Manna – the company’s flagship asset – is advancing through the definitive feasibility study phase, which will incorporate an updated mineral resource estimate.

In July 2023, Global Lithium upgraded Manna’s JORC resource to 36 million tonnes at 1.13 per cent lithium oxide.

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