Lithium’s wild ride

Lithium does not behave like oil, and the reason matters before any price discussion. It comes from two physically different sources, brine and hard rock, and yields two chemicals that are not interchangeable. More of the world’s lithium today comes from hard rock, both because it is faster than waiting months for brine to evaporate and because hydroxide, the higher-performing and pricier chemical, is easier to make from spodumene, while brine gives you carbonate and needs an extra step to convert it. Kann’s reading is that this breaks the usual commodity logic, in which a single cost curve gets cut wherever the price lands and the marginal producer shuts in. Scheyder adds a second complication: there is not even one price. Retail investors watch the Chinese spot price for lithium carbonate as a proxy, many contracts do not track it, the Chicago Mercantile Exchange has begun trading lithium and the London Metal Exchange plans to.

With that said, here is the cycle. Prices rose sharply into a peak that Kann places around 2021 and Scheyder agrees is right around there. The only price level named in the entire episode is Kann’s recollection that the Chinese spot price reached “the $80,000 range,” which Scheyder answers with no more than “that sounds familiar.” Scheyder’s account of the run-up is about expectation rather than physical shortage: 2021 was the first full year of the pandemic, with unusual attention on what a future electrified economy would need; the Inflation Reduction Act followed in 2022; retail investors piled into junior miners globally and equity valuations surged; consultants and analysts published steep demand projections. Crucially, not much new supply had arrived yet. Then, in the ensuing years, a great deal of it did, and by the January 2025 recording prices were, in Kann’s words, way below the peak. No figure is given for where they sat at recording.

The turn is that this is not a demand-failure story, however easily it reads as one. Scheyder says plainly that demand for lithium continues to rise and that more people keep buying electric vehicles. What changed sits on the supply side and in strategic behavior. There is a glut across both carbonate and hydroxide, and Chinese-linked producers are raising output or declining to curtail, effectively operating at a loss in what he calls a transparent bid for market share. China is simultaneously lifting domestic production from lepidolite, a source rock with a higher cost curve, environmental problems and opaque production data, and Chinese companies are mining hard rock in parts of Africa. The consequence is that Western producers do the curtailing instead. Expansion plans get shelved, and spending a billion or two on a refinery stops appealing to investors. Kann notes that a Portuguese refinery Galp had planned with Northvolt was cancelled the week of recording, though Scheyder adds that Northvolt had problems of its own. Low prices therefore do not merely squeeze margins; they entrench exactly the concentration that Western policy was built to dilute. The one concession Scheyder makes on the demand side is careful and worth keeping intact: expectations have been tempered relative to 2021 and 2022, and he now expects a larger continuing role for a petroleum-based economy in the mix. That is a hedge, not a reversal.

Which is why his closing answer is about Washington rather than geology. Mining has historically been a politically conservative industry and is now increasingly dependent on industrial policy, in a way he thinks oil and gas are not. Evidence that US policy is working is anecdotal so far, the clearest case being Quebec graphite miners charging a premium for North American material to battery makers chasing the vehicle tax credit, which helps graphite producers and hurts an electric vehicle industry already on thin margins. The technology hope, direct lithium extraction, he deliberately deflates: it has never worked at commercial scale, it is an umbrella term covering several approaches, and because every brine differs in chemistry the technology has to be tailored to each deposit, so cracking it in Arkansas proves nothing about Chile or Germany. He expects no single winner and no overnight fix, and says the answers he is waiting for come from policy after January 20th.