Industry giants are turning to a more optimistic view of lithium.

Chile’s Sociedad Quimica y Minera (SQM), in partnership with Australia's Wesfarmers, says we may now be at the end of a protracted lithium price slump. 

Ricardo Ramos, CEO of SQM, the globe's second-largest lithium producer, has put forth a cautiously optimistic outlook, particularly for the latter half of the year. 

This stance comes despite SQM's recent quarterly report showing a significant 82 per cent dip in net profit, attributed to the languishing lithium market.

The industry has been reeling from a supply glut, exacerbated by a production surplus over demand throughout 2023. 

This imbalance led to a precipitous fall in lithium prices, prompting production cuts across the sector. However, a recent surge in Chinese demand for electric vehicles (EVs) has injected a wave of optimism, suggesting a potential turnaround in lithium's fortunes. 

Analysts from Macquarie Bank echo this sentiment, forecasting a robust year-on-year growth in battery production come March, spurred by an increase in battery production plans.

Despite the upbeat outlook from various quarters, including a stable spodumene price at $870 per megatonne as of late February, scepticism remains. 

The Australian market has reacted with cautious optimism, with significant investments flowing into pure-play lithium mining companies such as Pilbara Minerals, Liontown, and Global Lithium, despite some of these being among the most shorted stocks on the Australian bourse.

Wesfarmers, SQM's partner in the lithium venture, including the Mount Holland mine, remains guarded about declaring a definitive market recovery. 

However, the company has expressed confidence in the strategic delay of projects potentially tightening supply and nudging prices upward. 

The Mount Holland mine's commencement of spodumene production appears to be a bright spot, with plans to convert the initial production into lithium hydroxide in China, ahead of the Australian refinery's completion.

The narrative woven by SQM and its allies embodies a blend of optimism and caution. 

While the industry's heavyweights project a rosier second half of the year, underpinned by burgeoning EV demand and strategic production adjustments, the market's response is a mix of enthusiasm tempered with a dose of scepticism.