LIVINGSTONE MARUFU
The persistent decline in the price of the white gold on the global market has created significant hurdles for the viability of the lithium subsector, it has been learnt.
It appears that the glut of lithium and rising interest rates have affected demand for electric vehicles, causing the commodity price to drop to about US$20,000 per metric tonne from above US$80,000 in 2022.
Lithium miners has been compelled to meet escalating expenses by reducing production levels and laying off hundreds of people.
Isaac Kwesu, the CEO of the Chamber of Mines of Zimbabwe (CoMZ), told Business Times that immediate government action is required to rescue the expanding subsector.
“International lithium prices have seriously gone down and the revenue base has equally come down at a time when the cost of doing business has not matched or consummerated.
“It is our hope from the Chamber side that the lower commodity price cycle will normalise in the next 12 months and everything will come back to normalcy rather than what they are going through,” Kwesu said.
He added: “So this is not only unique to the lithium sector, but the whole mining sector besides gold, is facing depressed commodity prices.”
In the latest Chamber of Mines of Zimbabwe survey report, most mining executives expect the lithium market conditions to worsen this year.
They are anticipating commodity prices to further slowdown in 2024, mostly for PGMs and base metals citing geo-political tensions and weak global economic outlook.
“Lithium producers and nickel producers are expecting price declines averaging -14% and -10%, respectively.
“Despite most mining companies planning to ramp up production to compensate for revenue losses due to low prices, the production increase will be more than offset by the decline in prices,” the report said.
Metals and minerals prices, which briefly increased in January 2023, are expected to fall by 11.8% in 2023, relative to 2022 and a further 4.8% in 2024.
The decrease is a result of the anticipated weak global demand in manufacturing and China’s recovery which is expected to be heavily services-oriented.
Strong supply growth is projected over the forecast horizon, supported by a recovery from production outages and new mines coming on stream for key metals (copper, nickel, and zinc).
Despite the expected fall in commodity prices, the government expects lithium to bounce back as the mineral of choice.
In his 2024 Budget Presentation, Finance, Economic Development and Investment Promotion Professor Mthuli Ncube said the mining sector is expected to grow by 7.6% in 2024, driven mainly by ongoing investment in PGMs, gold, coal and lithium.
“The growth will also be sustained by expected relatively stable electricity supply on account of increased domestic electricity production, complemented by direct import initiatives by large scale miners and private sector investment initiatives in renewable energy, especially solar.
“The sector, however, faces risks related to declining mineral commodity prices, particularly for PGMs which have the potential of scaling down ongoing expansion projects in the medium to long term,” Ncube said.
Despite the fall in prices, this range is still above pre-pandemic levels that never exceeded US$20 000/mt.
Experts said the lithium industry is cyclical, like most other sectors, and the current pricing is still strong enough to attract investment.
