Lithium Price Forecast - Down And Out In 2023

Lithium Price Forecast For 2023

The run in lithium is over. 

A confluence of factors have catapulted lithium prices in 2022. 

Soaring demand from EVs. 

Supply limitations from long lead time mining expansions.

Major refining problems to turn raw lithium into “batttery grade.” 

Everything has gone lithium’s way and pushed prices to historic highs. 

All of it’s about to change fast though. 

And if you’re a lithium investor, you may not want to be after you see what’s coming for lithium this year. 
 

The Solution To High Prices: Lithium Edition

We’ll start our prediction not with lithium, but with lumber. 

Lumber saw a similar run-up for very similar supply and demand reasons as we’re seeing right now with lithium.

Supply was tightened because of the pandemic shutdowns. 

Demand was steadily rising from the pandemic housing boom.

The explosive combination sent lumber prices to new all-time highs. 

This is a 10-Year Lumber Price chart from Trading Economics shows just how crazy lumber prices were during the pandemic.





Lumber prices nearly tripled their past all-time highs. 

Of course, it was a situation that wouldn’t and couldn’t last. 

And it didn’t.

Supply has caught up a bit. Demand has cooled off. And lumber is right back where it normally is.

This happens all the time in commodities. 

And right now we believe it’s about to happen to lithium for a number of reasons. 

First, before a crash, there usually should be a significant rise. 

That’s definitely the case in lithium prices.

This Lithium Price Chart put together by Benchmark Mineral Intelligence shows a composite lithium prices going back to 2016:





It was chugging along and then, bam, it just took off. 

The index has easily risen five-fold from where it was before the pandemic began. 

The combination we’ve cited before. 

Rising demand from record-setting EV sales and supplies which are falling well behind. 

Goldman Sachs has put together some research on the supply/demand imbalance in lithium. 

The research report titled Battery Metals Watch: The End Of The Beginning and this chart shows a huge shortage in 2021 that stretched into 2022:





That kind of shortage in the early years is exactly what’s needed to send the price of a commodity up some 500%. 

But as we saw with lumber recently and every other commodity bubble in history, the high prices rarely last. 

And that’s why 2023 is set to be a super tough year for lithium prices. 

Goldman’s chart is predicing a surplus of about 8% this year.

That alone is enough to crush the lithium bull. 

But in 2024 it expects the surplus to double again to 16%. 

As you saw in 2020, a 12% discount was enough to help drive prices up 500%...

A surplus even bigger than that could easily do the inverse and send lithium prices cratering. 

Again, that’s what Goldman is predicting with this chart from that same report, Battery Metals Watch: The End Of The Beginning:





That’s a 75% potential crash in lithium price in 2022. 

And given the amount of investment in lithium mines and headwinds in the EV market, it’s a big crash, but certainly plausible. 

Lithium stocks are at great risk. 

This should be a warning to all investors.