Lithium producers are seeking better prices for the raw materials used in batteries. In doing so, they hope to control better discounts, which have increased in recent years.
Lithium prices have been under pressure for some time. With the decreased demand for electric cars, the demand for lithium batteries – and thus for the raw material itself – has also dropped significantly.
The price of lithium has been falling for two years and at one point reached only 10 per cent of the peak price. Because of this sharp price drop, customers are demanding more and more discounts from suppliers.
According to Bloomberg, suppliers now want to stop increasing discounts. The plan for 2025 is to stabilize discounts or increase them by a maximum of 2 per cent. This should eventually lead to discounts of only 5 to 10 per cent for specific deals by 2024.
Margin pressure producers
A significant reason for this strategy is that lithium producers are increasingly struggling with shrinking margins. Whereas previously there were fixed prices for lithium, at the height of the electric car market, the industry moved to annual fixed prices, similar to other commodities such as copper.
These prices are often set based on indexes that consider benefits and discounts. By having to discount less, producers hope to improve supply conditions somewhat over the next 12 months. However, final deals remain dependent on factors such as volumes, contract periods, and other variables.
Lithium producers, particularly those from Latin American countries such as Chile and Bolivia, mainly focus their negotiations on Asian customers. Large customers from countries such as South Korea, Japan, and China are major players in the lithium market.
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