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Business News/ Special Report / EVs Are on a Lithium Roller Coaster

EVs Are on a Lithium Roller Coaster


Prices of the key battery metal have fallen by roughly 70% this year, easing battery-cost worries but casting doubt on longer-term supply.

Albemarle said it had abandoned its cash offer for Australian lithium miner Liontown Resources.Premium
Albemarle said it had abandoned its cash offer for Australian lithium miner Liontown Resources.

High oil prices deter people from buying gas guzzlers: What is good for Exxon Mobil is bad for Ford. But 100 years ago, both companies were growing rapidly: More cars meant more fuel.

Both dynamics are at play in the relationship between electric vehicles and lithium, the key ingredient of electric-vehicle batteries. More EVs will require more lithium, but only at the right price. This makes it a tough market to time for investors—and indeed for lithium producers such as Albemarle.

The company on Sunday walked away from a deal to buy Australian lithium miner Liontown Resources for roughly $4.2 billion. Australia’s richest person, Gina Rinehart, last week disclosed a 19.9% stake in Liontown through her own mining company, Hancock Prospecting, raising the possibility that Albemarle would have had to contend with a minority partner in the project.

But that probably isn’t the only reason Albemarle got cold feet. It submitted its first of many bids for Liontown in October 2022, when lithium fetched about $66,000 a metric ton, according to a weighted average of the key chemical compounds by Benchmark Mineral Intelligence. That metric had fallen to about $27,000 by early October this year. Albemarle’s share price has slipped in tandem, down almost a half since its peak last November.

There were strategic and financial problems too. The deal was going to be funded in cash, raising Albemarle’s leverage at a time of rising debt costs. And Liontown had pledged the lithium ore it expected to start producing next summer to automakers including Tesla and Ford, limiting the acquirer’s room for maneuver. Albemarle is better known for chemical processing than mining and would presumably have preferred to feed Liontown’s lithium into its own supply chain rather than handing it over to carmakers.

Albemarle investors seem to be relieved the deal is off: The shares rose almost 3% on Monday. Conversely, Liontown’s will likely tank when they reopen for trading no later than Wednesday. Trading has been suspended while the company seeks fresh capital to fund its final preproduction push.

Liontown may not have been the right deal at the right time for Albemarle, but the company will have to find more lithium somewhere. Despite volatile pricing, the market is expanding quickly as carmakers sell more EVs, particularly in China but increasingly elsewhere too. Citigroup expects lithium consumption to rise 21% a year on average through 2030, driven overwhelmingly by the automotive industry.

Fresh supply is coming onstream that will push the market into surplus for a few years. That is why prices have been falling lately, and will likely continue to fall for a while. As with other commodity markets, though, a bear market will set the stage for a rally as more costly sources of supply are curtailed. Most analysts currently expect a lithium-supply deficit toward the end of the decade.

Lithium is on even more of a roller coaster than most resources. Rapid growth makes it harder for markets to balance, and lithium chemicals aren’t stable enough to be stored for long periods, further exacerbating the problem.

This volatility in turn affects the EV market, though the relationship isn’t straightforward. Car manufacturers are often protected by fixed contracts with lithium suppliers such as Albemarle, which means they experience inflation with a delay. Tesla raised headline car prices as lithium rose and cut them when it fell back, but changing subsidies and interest rates also affected affordability over the same period.

There has been a clearer pattern in recent investor sentiment. As lithium stocks such as Albemarle and SQM soared last year, Tesla and BYD fell. This year, the reverse has broadly been true. Yet lithium stocks were long seen as a play on the success of EVs, and ultimately the two sectors will have to grow output together, just as Exxon-forerunner Standard Oil and Ford once did.

To fulfill its promise, the lithium industry needs to be profitable enough to invest—but not so much as to throw EVs off course. It isn’t turning out to be an easy balance to strike.

Write to Stephen Wilmot at

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