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China's lithium carbonate price uptrend set to continue in months ahead: sources

Highlights

Prices breach Yuan 300,000/mt levels

Securing lithium spot supply challenging

NEV sales to see substantial growth in 2022

Year-end subsidy policy to sustain demand rush

  • Author
  • Staff; Leah Chen
  • Editor
  • James Leech
  • Commodity
  • Metals

China's lithium carbonate prices have posted new highs over the past few weeks and the price uptrend is expected to continue in upcoming months amid supply tightness and surging demand, industry sources said Jan. 11.

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S&P Global Platts assessed battery-grade lithium carbonate reached Yuan 303,000/mt ($47,548/mt) Jan. 11 on a delivered, duty-paid China basis, after prices breached the $300,000/mt level Jan. 10.

Lithium carbonate prices have now risen 35% on month and are up 531% on the year, Platts data showed.

It's very difficult to secure lithium salts in the spot market, as many producers are almost out of stock now, sources said.

"A lot of downstream consumers would rather get their hands on spodumene and pay a refiner to produce the salt for them, as they feel that it's too difficult to get lithium salts in the spot market in view of the high price and limited stock," an international spodumene trader said.

"We don't have enough inventory to sell. All our lithium carbonate is used in-house to produce lithium iron phosphate batteries as demand for LFP remains strong," a domestic producer said.

Potential supply tightness and significant increase in downstream demand will keep domestic lithium chemicals prices on an upward trajectory, market participants said.

New energy vehicle market

China's new energy vehicle sales are expected to reach 3.4 million units in 2021 and 5 million units in 2022, according to a forecast released by China Association of Automobile Manufacturers, or CAAM, in December.

If realized, China's NEV sales in 2022 will be 300% more than what the country sold in 2020, CAAM data showed.

Some market observers expected China's NEV sales to soar past 6 million units in 2022, as consumers may rush to purchase NEV ahead of an anticipated rise in sales price as China will stop offering subsidies on EV purchases from Dec. 31.

China has seen an explosive growth in its NEV market in recent years, easily surpassing the growth seen in developed markets such as the EU and US.

To meet the surging demand, Chinese power battery makers have also expanded their production capacity.

With new or expanded projects of cathode materials expected to come online in 2022, this development would act as a strong support for domestic lithium carbonate demand. However, growth of lithium carbonate capacity would lag far behind that of demand in 2022, sources said.

"I just cannot see how supply can keep up with projected demand for this year," said another international trader.

Although market sentiment remains positive, some sources hinted price volatility is imminent.

The increase in lithium salts prices is not healthy for the market because the material has a strong cyclic nature, a European supplier told Platts. There is a mismatch between demand and supply, so prices will reach a peak very quickly but also drop equally quickly, he said.

Price direction still shows an uptrend, but not sure when prices will reach an all-time high, the supplier said, adding that market is supply driven now but depends on who has greater need -- producers or consumers.