Chinese lithium prices fall 30% as demand for electric vehicles weakens

The cost of clean energy’s ‘white gold’ is still eight times what it was a year ago.

Lithium, the “white gold” of the clean energy industry, saw a monumental rise in 2021 with booming EV sales. Chinese demand has cooled off recently and has been met with uncertainty about the market's future for this precious metal used to power electric vehicles worldwide.

The news of Chinese lithium prices falling by 30% could be highly relevant to your portfolio. This week, demand for electric vehicles weakened significantly due to a combination of government subsidies being reduced and overall market uncertainty. As a result, lithium prices on the Shanghai Futures Exchange plummeted, which has left many traders scrambling to rearrange their portfolios.

On January 11th, 2023, we shared trade ideas with Masters in Trading Community members to purchase the lithium stock SQM.

Being successful as a trader requires confidence in your trade decisions but also the ability to be agile and change positions if something changes in the market. I provided an example of this flexibility on January 11th, when I shared an idea to invest long in Lithium by buying stock in SQM.

However, this week Lithium prices suffered big losses, quickly changing the outlook of this position and therefore forcing astute traders to react.

Lithium prices have taken a dramatic turn since late November, with the average spot price of Lithium Carbonate experiencing a startling 23.1% decrease year-to-date. This significant drop has been partly attributed to waning demand due to the slowdown in EV sales, partially caused by the scaling back of government subsidies and incentives. With the electric car market initially propelling Lithium prices to 10 times their value, it is suspected that they may dip even further this year as Lithium faces supply gluts and lackluster growth in the sector. As promised, we updated our community members on the situation, and I decided to sell my SQM stock after only 40 days of holding it. This story is a reminder that traders should remain confident in their actions yet not become too attached or stubborn with their decisions—staying nimble will allow you to successfully identify profitable trades.

Ultimately, trading lithium is a difficult trade. Time, knowledge, and experience are the main components of a successful trader. It is important to take time to conduct research so that you can have strong opinions when it comes to trading decisions. However, stubbornness is not a virtue in the world of trading; being willing to re-evaluate risk and adjust accordingly makes all the difference. It’s not enough to just be right, as the best traders know when they’re wrong too.

If you feel like you need focused guidance on your journey toward becoming a top trader, connect with other like-minded traders from around the world in Masters in Trading Community and experience firsthand how small changes in attitude can lead over time to big changes in returns!