- Lithium prices plummeted to 2-year lows amid oversupply in 2023.
- Zimbabwe pins economic revival on growing its lithium industry.
- Zim continues to exports raw lithium due to infrastructure, refining capacity constraints
Harare- As the world grapples with geo-economic fragmentation due to the Middle East's crisis and the Russia-Ukraine War, the future of lithium remains uncertain. Despite the global push for a carbon-free economy by 2060 and the first-world nations' plans to cut emissions by at least 30% by 2030, the lithium market has experienced a rollercoaster ride.
After a significant price surge since 2021, reaching record highs in November 2022, lithium carbonate prices have since slid back. According to the latest data, lithium carbonate prices fell to CNY 105,000 (US$14 583) per tonne in May, trading in a tight range since reaching a two-and-a-half-year low in February, amid an ongoing surplus of raw material for electric vehicle battery manufacturers.
This represents the lowest prices since August 2021.
Year-on-year, lithium is the worst-performing metal, down 65%, followed by PGMs, particularly palladium and rhodium, which have declined by 31% and 32%, respectively.
This is bad news for Zimbabwe, which has tied its economic revival largely to PGMs, gold, and the emerging lithium resource.
Lithium reached an all-time high of CNY601,259 in November 2021, the highest in seven years. Lithium is a silver-white light metal, and its hydroxide is used in batteries for electric vehicles and mobile phones, produced through a chemical reaction between lithium carbonate and calcium hydroxide.
The biggest lithium producers are Chile, China, Australia, and Argentina, while the largest lithium importers are China, Japan, South Korea, and the United States.
Zimbabwe, ranking seventh in lithium reserves globally and first in Africa, had expected lithium to contribute to a US$12 billion industry in 2023, with revenues reaching up to US$500 million. Lithium is one of the pillar mineral the country hopes to leverage for economic growth.
Amid this precarious economic stage for lithium miners, Zimbabwe has urged producers to export value-added lithium, banning the export of raw lithium. Currently, Chinese lithium miners, who dominate the sector in Zimbabwe, only produce lithium concentrates, which they ship to China for further processing.
The government had initially given miners until March 2024 to submit plans for in-country refining, but later extended the deadline by two months at the request of some miners.
Zimbabwe's hard-rock lithium reserves, among the world's largest, have attracted over US$1 billion in investment from Chinese miners, including Zhejiang Huayou Cobalt, Sinomine Resource Group, Chengxin Lithium Group, Yahua Group, Canmax Technologies, and the Tsingshan Group.
However, Huayou has said it would explore production of battery-grade lithium in Zimbabwe "only when the construction and economic conditions are right," citing the lack of resources needed for such production, including reliable renewable energy, natural gas, and sulphuric acid.
Zimbabwe insists on local refining as it seeks to capitalize on the projected growth in lithium demand as the world shifts to cleaner energy sources.
The country's economic challenges, including the introduction of a new currency, ZiG, which requires backing by gold and US dollar reserves, have put pressure on foreign currency reserves.
With mining, including PGMs and lithium, contributing up to 60% of Zimbabwe's foreign currency earnings, the downturn in these sectors has further strained the country's reserves.
This, combined with the ongoing drought, has weakened the ZiG currency, leading to a 36% variance between the formal and informal market as the government tries to support the currency through pegged rates amid diminishing reserves.
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