Image by Michael Marais via Unsplash
Argentina’s salt flats, located in South America’s “lithium triangle,” have long been a hotbed of activity for companies eager to extract the battery metal crucial for the global transition to electric vehicles (EVs). According to Reuters, now, many of these firms are scaling back.
The global lithium industry, stretching from Chile to Zimbabwe, is grappling with a steep 80% drop in prices since early last year due to oversupply and weaker-than-expected EV demand. This has hampered financing and squeezed profit margins for miners of all sizes.
Companies have responded by cutting staff, reducing spending, and pausing exploration projects. The falling value of lithium assets has also left some firms vulnerable to takeovers.
Argentina, the world’s fourth-largest lithium producer, is home to the second-largest reserves of the metal and has been a focal point for investors seeking to secure supply.
The lithium price squeeze is reshaping the global market, pushing miners to cut costs and sparking increased interest in mergers and acquisitions (M&A). Companies are now seeking stronger financial backers to weather the downturn. Earlier this month, mining giant Rio Tinto agreed to acquire U.S.-based Arcadium Lithium for $6.7 billion, making it the world’s third-largest lithium producer. Five analysts consulted by Reuters expect more M&A activity, particularly targeting early-stage projects.
Despite current challenges, Argentina is still expected to bring several advanced projects online in the near term. However, the real impact will likely be felt around 2026-2028, when output is expected to be lower than initially projected, according to analysts.
This could contribute to a potential supply shortfall toward the end of the decade, as demand for lithium, driven by EVs and energy storage, is expected to rise.
As of July, Argentina had 30 companies at various stages of exploration across its lithium-rich region. However, the downturn is likely to slow this pipeline, with earlier-stage projects feeling the brunt of the impact.
“Exploration has been heavily affected by the drop in lithium prices,” said Flavia Royon, head of a government-sponsored lithium development committee. She added that the main hit to output would likely occur by 2028.
While the current shakeout is challenging, it has made many projects more appealing to potential buyers. Valuations for lithium companies globally have dropped by about 60% to 70% in the past 18 months.
Most industry executives remain hopeful that prices will rebound – though not to their previous peaks – as EV demand picks up. However, the turnaround is not expected until mid-2025.
The head of an early-stage lithium project in Argentina, who requested anonymity, said he anticipates prices will recover by the second or third quarter of next year, enough to restart project development. Some analysts, however, predict that low prices will persist through the first half of 2026.
