Chile's Lithium Export Revenues Decline in 2024 Amid Falling Prices

Abstract

This report examines the current state and future outlook of Chile's lithium market amid falling global prices. Lithium production in Chile is expected to grow modestly in 2024, yet export revenues are anticipated to decline significantly due to price drops. Global lithium production is forecast to rise, with a surplus predicted for 2024 and 2025, primarily driven by the ongoing global energy transition and the increasing demand for electric vehicle (EV) batteries. The report also highlights the growth in lithium projects in Chile and Argentina and provides an outlook on lithium pricing trends, production, and demand over the next decade.

According to a report from BNamericas, Chile's lithium export revenue is expected to decline again this year due to falling prices, similar to the trend seen in 2023. Chile's lithium carbonate equivalent (LCE) production is projected to reach 275,000 tons this year, representing a modest 2% growth. However, a report from the Chilean Copper Commission (Cochilco) indicates that due to declining prices, the country's lithium export revenue for the first five months of this year totaled $1.59 billion, down 65% compared to the same period last year.

As of last week, the price of lithium carbonate with a 99.2% grade stood at approximately $9,800 per ton, reflecting a 15% decrease within the month. This downward trend is expected to continue until 2027, as several lithium projects around the world are scheduled to commence production during this period.

Juan Esteban Fuentes, a market analyst from Benchmark Mineral Intelligence (BMI), predicted during a conference in Santiago, Chile, that lithium production will increase in 2026-2027. He also forecasted that there will be an oversupply in 2028-2029, followed by a shortage in 2030. Prices are expected to rise from $14,000 per ton to $36,000 per ton during this period, before stabilizing around $25,000 per ton.

The anticipated supply shortage is primarily driven by the global energy transition, which is accelerating the production of batteries, cathode materials, electrolytes, anodes, solar panels, and other downstream products.

On the other hand, Cochilco pointed out that sluggish electric vehicle (EV) sales, strong sales of hybrid vehicles that use less lithium per unit of energy, and the introduction of new products have contributed to the decline in lithium prices. The sharp increase in lithium prices in 2022 and 2023, when lithium carbonate prices peaked at $70,000-$80,000 per ton, prompted companies to scale back their production plans as prices began to fall.

Lithium Market Outlook: 2024 Global Production Surplus

This year, global lithium carbonate production is expected to reach 1.25 million tons, up from 988,000 tons last year. Demand, on the other hand, is projected to reach 1.13 million tons. Cochilco forecasts that next year, production will rise to 1.59 million tons, with demand reaching 1.4 million tons. This implies a surplus of 117,000 tons this year and 191,000 tons next year.

To put this into perspective, global lithium production in 2015 was just 172,000 tons, with demand at 191,000 tons, reflecting an average annual growth rate of 25% between 2015 and 2024.

In just nine years, lithium production has expanded from eight countries and 20 mines to 14 countries and 62 mines, with the number of projects expected to reach 80 by the end of this year. Fuentes noted that China, Australia, and Argentina collectively produced 700,000 tons of LCE.

By 2034, the number of lithium production projects worldwide is expected to increase to 150, spanning 29 countries, with global production reaching 2.6 million tons.

Growing Demand Driven by EV Production

Demand for lithium is primarily driven by the production of electric vehicle (EV) batteries, as internal combustion engine vehicles are gradually phased out. According to the International Energy Agency (IEA), the global EV stock is expected to reach 245 million vehicles by 2030, representing one-sixth of the global fleet. By 2035, this number is projected to rise to 505 million vehicles, or one-third of the global fleet.

Marcos Lima, former CEO of Codelco, advised companies to re-evaluate their sales strategies as the market expands. He emphasized the importance of diversifying customer assets in light of the growing market size.

Lithium Projects in Chile and Argentina

Chile has seven lithium projects in development, including expansion projects in the Atacama salt flats by Sociedad Química y Minera de Chile (SQM) and U.S.-based Albemarle. Once Chile's national lithium strategy is fully implemented, the number of projects is expected to increase further.

Argentina's Ministry of Economy reported that the country has 38 lithium projects in the advanced stages of development, with a potential annual production capacity of 464,400 tons of LCE.

According to a report from the Rosario Stock Exchange in April, two mines in Argentina produced 50,700 tons of LCE last year, and seven new projects were commissioned by the end of the year.

Chile remains the world's second-largest lithium producer, while Argentina ranks fourth. However, Argentina is expected to climb the ranks before 2030 as its lithium production capacity increases.

Conclusion

The global lithium market is undergoing rapid expansion, with production increasing significantly, especially in countries like Chile, Australia, Argentina, and China. However, falling prices, oversupply, and fluctuating demand pose challenges in the short to medium term. Chile's lithium export revenues are expected to decline due to these market conditions, despite steady production growth. The global demand for lithium, driven by the EV market and energy transition efforts, will continue to grow, leading to potential shortages by 2030. Companies involved in lithium production need to carefully assess their strategies to navigate the evolving market landscape, with a focus on diversification and forward-looking sales plans. Chile and Argentina are poised to play critical roles in meeting future demand, with several new projects in the pipeline, but market dynamics will require ongoing adaptation and strategic planning.