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China Battery Metals Outlook 2021: Lithium prices to rise on strong EV sales


Most respondents see China's lithium metals demand and prices rising

Chinese capacity expansion not expected to cap price increases

Singapore — China's demand for battery grade lithium carbonate and hydroxide is expected to increase in 2021 on stronger electric vehicle sales, pushing domestic prices higher, according to S&P Global Platts' China Battery Metals Outlook for 2021.

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Some 96% of respondents expected China's demand for lithium metals to rise further this year, with stimulus measures expected to boost demand for EVs, while 91% and 78% of market participants canvassed thought China's battery grade lithium carbonate and hydroxide prices will be higher this year than last.

About 56% believed there will be a big recovery in the battery metals sector this year, though a sizable 35% were unconvinced the sector has yet to turn the corner.

Most participants expected domestic lithium carbonate prices would reach Yuan 80,000/mt ($12,371/mt) this year, an increase of more than 20% from early January. But they thought prices of Yuan 100,000/mt ($15,463/mt) would not be realistic this year.

"There is definitely room for lithium prices to go up, but not too much as battery makers are doing all they can to keep costs down," one participant said.

China's battery-grade lithium carbonate and hydroxide prices averaged Yuan 43,845/mt and Yuan 50,346/mt, respectively, in 2020, Platts assessments show.

Lithium carbonate and hydroxide prices have rebounded by 88% and 21% from lows over July-August 2020, surging by 32% and 13%, respectively, in January alone.

Some 80% of market participants expected China's lithium carbonate and hydroxide capacity would expand this year, but the majority (59%) did not think this would put pressure on prices. This was because lithium metals demand was also rising.

Spodumene supply tight

More than half (57%) of respondents believed spodumene supply would remain tight due to expanding lithium carbonate and hydroxide capacity, which would in turn bolster Chinese lithium metals prices. However, 30% held the opposite view.

With few new projects in the pipeline for this year, spodumene supply could struggle to keep up with growing demand, which should ensure prices are well supported, some respondents noted.

Some 78% expected battery grade lithium carbonate prices would go up in 2021, while 22% thought prices would be similar to last year.

Meanwhile, 67% expected battery grade lithium hydroxide prices to increase in 2021, while 33% expected them to be little changed from 2020.

The China Association of Automobile Manufacturers predicts China's EV sales will hit 1.8 million units in 2021, up 40% from a year earlier. The stronger outlook is based on a recovering economy and policies to boost vehicle consumption.

Platts spoke to 23 companies for the Outlook, comprised of domestic and international lithium metals producers, consumers and analysts.