Lithium & Battery ETF (LIT) at risk as miner warns on lithium demand

The Global X Lithium & Battery Tech ETF (LIT) has plunged hard in the past few months. It has crashed by over 54% from its highest point in November 2021. It is now trading at its lowest point since November 2020.

Major company downgrades lithium demand

The ETF, which tracks the biggest lithium mining companies, is under pressure as the price of lithium has crashed by 82% since January 2023. Lithium was trading at $13,500 per ton and some analysts believe that it has more downside to go.

One of the biggest lithium news came from Australia, where Albemarle warned that demand was not rising fast enough. The company slashed its 2030 lithium demand estimate by about 10% to 3.3 million tons. Its previous estimate was 3.7 million tons.

Lithium and other clean energy metals like nickel and cobalt have been in a deep dive recently. The situation has gotten so bad that the Australian government is considering offering some tax credits to mining companies.

The main reason for this price action is that China has a strong control of the major lithium, nickel, and cobalt miners internationally. The country is widely known for over-producing in a bid to lower prices as it did with steel. 

Looking ahead, the next key catalyst for the LIT ETF is the upcoming earnings by some of the biggest mining companies in the industry. Some of the most notable companies that will publish their results are Glencore, Anglo American, Rio Tinto, BHP, and Albemarle.

Lithium prices have also crashed because of the ongoing soft demand for electric vehicles in key markets. The WSJ had a long story in which it explained that EV demand was softening in China, a country that is pumping EVs at the fastest pace on record.

As a result, many Chinese companies are moving to other markets. Nio has already started selling its vehicles in Europe while BYD is considering building a plant in Mexico to target American customers. It is unlikely that EVs will bounce back any time soon as the industry struggles to move to mass adoption.

LIT ETF stock price forecast

LIT chart by TradingView

Turning to the weekly chart, we see that the Global X Lithium & Battery Tech ETF has been making lower lows for months. It flipped the important support at $56.8, the lowest swing in December 2022 and April 2023. The ETF remains below all moving averages and the 61.8% Fibonacci Retracement level.

Therefore, the outlook for the LIT ETF is bearish as the ongoing cycle continues. This could see it crash to the next point at $34, the 78.6% Fibonacci Retracement point. This price is about 22% below the current level