eBusiness Weekly
Business Writer
Zimbabwe’s ambitious plans to transform lithium into a cornerstone of economic transformation could be facing a reality check as the tumbling of the “white gold” threatens to significantly impact the country’s earnings from the metal.
Lithium, a key component in electric vehicle batteries, has seen its prices skyrocket in recent years fuelled by surging demand for clean technologies.
Zimbabwe, believed to host one of the largest lithium reserve in the world emerged as a potential powerhouse, attracting global capital and sparking hopes for economic growth.
However, the tide appears to be turning. Lithium prices have been on a steady decline.
Last year, the prices were down by nearly 80 percent from US$80 000 in 2022 to US$18 750 by the end of 2023. The fall was mainly attributed to an oversupply in the market, contrasting with the previous year’s high demand and price levels.
Several mining analysts contend the year 2023 witnessed a much-needed price correction after an unsustainable price increase a year earlier. They argue that the dramatic price hikes, resembling historic peaks from China in the 80s and 90s, lacked real justification, said Andrew Miller, chief operating officer of Benchmark Intelligence.
He argues that 2023’s price correction was long overdue following a year of unjustifiable price surges.
“(The year)2023 has undoubtedly been the year of a correction. There had to be a correction in that price,” Miller told Jeremy Szafron, anchor of Kitco News in a recent interview.
“It isn’t sustainable, and there was no fundamental reason why prices were at the China spot level that we saw in the 80s, 90s over the course of last year.”
Prices of lithium in China, the top consumer of the minerals are expected to further decline this year after the world’s largest economy, after the US, slashed subsidies for EVs.
“China is the key player in the lithium industry undoubtedly. This influence is critical as China’s lithium supply and pricing decisions significantly affect global markets — China’s vast chemical conversion capacity positions it as both a major lithium supplier and a demand driver. The decline in China’s lithium carbonate prices in 2023, due to bearish sentiment and limited demand, mirrored global market trends and highlighted the interconnectedness of the lithium industry,” said Miller.
However, Miller was cautiously optimistic, and industry analysts predict a potential rebound.
“We are going to need much higher price levels than we’ve seen historically in the lithium market.
“This expected increase in prices is in response to the growing demand, especially from the expanding electric vehicle market. Analysts suggest that the oversupply situation might balance out, leading to stabilisation and growth in lithium prices.
“The forecast for lithium in 2024 and beyond suggests a more balanced market, aligning with the anticipated surge in global demand driven by the clean energy transition,” said Miller.
Carlos Tadya, a local economic analyst said a surge in interest rates had stalled the EV boom, with major players like General Motors and Honda hitting the brakes.
This has triggered a global glut of lithium, the essential ingredient for electric car batteries.
“Recent months have witnessed a contraction in electric vehicle expansion plans by major manufacturers largely driven by rising interest rates which subsequently dampened demand and in turn created a global surplus,” said Tadya.
“Unfortunately, despite Zimbabwe poised to become a major producer, we are just price takers.
Zim lithium boom
Zimbabwe’s lithium production has witnessed an astonishing 1 300 percent surge since the country’s foray into the battery metal industry five years ago, according to the Treasury.
In 2023, lithium output reached a remarkable 882 000 tonnes, a significant leap from the 63 000 tonnes produced in 2019. It is noteworthy that the 2023 figures only account for production up to October.
The lithium sector has emerged as a major recipient of foreign investment, with several Chinese-owned mining companies establishing processing facilities in the country. This influx of investment has played a crucial role in driving the growth of the lithium industry.
The meteoric rise in lithium production highlights Zimbabwe’s vast potential in the global battery metals market. It is estimated that the country boasts some of the world’s largest lithium deposits, and its position as a major producer is poised to strengthen in the coming years. Some analysts believe Zimbabwe could account for 25 percent of the global lithium requirements in the coming years.
Last year, Chinese companies put two lithium plants into operation in Zimbabwe, injecting impetus to the African nation’s push to become a major value in the supply chain for lithium batteries.
On July 5, Zhejiang Huayou Cobalt, through its local unit Prospect Lithium Zimbabwe, commissioned a US$300 million processing plant at its Arcadia lithium mine in Goromonzi near the capital Harare, as it seeks to consolidate its position as one of the top battery material producers in the world.
In 2022, the Chinese company completed a US$422 million acquisition of the Arcadia lithium mine from Australia-listed Prospect Resources with other investors.
Following the completion of the processing plant at its Arcadia mine, PLZ currently has the capacity to process 4,5 million tonne of lithium ore, and produce 450 000 tons of concentrate annually.
Zimbabwe’s lithium exports have grown tremendously over the years, rising from US$1,8 million in 2018 to US$209 million during the first eight months of the year 2023.
EVs carmakers hitting the brakes
Despite ambitious plans to invest US$1,2 trillion by 2030 and propel EVs from niche products to mainstream models, automakers are hitting the brakes.
Rising costs and dampened demand, particularly due to higher interest rates, have forced legacy carmakers and startups like Tesla and Rivian to scale back investments and rethink their strategies.
This has led to appeals for increased government support to ease the transition to EVs, building on existing subsidy programmes.
Consumer demand for EVs is surging worldwide, with global sales doubling in the past two years.
However, in the US, adoption is lagging, despite strong interest. Analysts feel industry expectations of a rapid transition appear out of reach
For middle-income earners, the sticker price of an EV is just the starting point. When high-interest rates are factored in, monthly payments can quickly become a budget-buster, pushing EVs further out of reach compared to traditional gasoline-powered cars.
