Markets with long time between investment and realization have some funny dynamics.

The article claims a 5% difference between production and sales. That small difference means entire players will fail, and every one will suffer. A 5% difference on the other direction means incredibly large profits, but electrical automobiles priced outside of the capacity of most people to pay.

With time it will stabilize, but you can expect many more of those headlines.

Lithium supply can be grown without meaningful limit, if someone is willing to invest the capital for it. The problem is that the supply follows the capital investment with a ~5 year lag, and 5 years ago a little too much was invested, so now there is a glut.

As the actual extraction costs are relatively small compared to the initial capital outlay, and everyone needs to pay their investors, no-one can really cut production and everyone needs to sell at whatever price they can until someone goes bankrupt and capacity is reduced again. This is how relatively small mismatches in capacity can lead to major price fluctuations.

>and everyone needs to pay their investors, no-one can really cut production and everyone needs to sell at whatever price they can until someone goes bankrupt and capacity is reduced again.

So it has nothing to do with market supply and demand problem but companies cashflow problems? So theoretically the banks which funded these extraction can also hedge against it with the rise and fall of lithium price?

Lots of mining sites have created a supply glut, this isn't a downturn just a market correction. Not a negative for consumers.