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China battery metals, lithium demand to increase in 2020 despite coronavirus impact: Platts survey

Highlights

Lithium chemical market participants in China expect demand to increase this year

New Energy Vehicle market expected to grow despite impact of coronavirus on consumer behavior

Chinese government expected to continue policy on NEVs, unlikely to reintroduce subsidies

Battery grade lithium carbonate prices seen averaging Yuan 45,000-65,000/mt ($6,400-$9,250/mt) in 2020

Chinese market participants anticipate demand for lithium chemicals to increase in 2020 despite expectations of a softer first quarter due to the coronavirus impact, according to a new Battery Metals & Lithium Outlook Survey by S&P Global Platts.

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Around 75% of respondents saw demand increasing this year, with a further 21% expecting demand to be at the same level as in 2019. Just 4% believed lithium demand would fall in 2020, the survey found.

S&P Global Platts China Battery Metals & Lithium Outlook Survey

There was plenty of optimism around China's New Energy Vehicle or NEV market. Some 59% of respondents expected both NEV output and sales would rise this year, while 33% believed they would be similar to last year. Only 8% thought NEV output and sales growth would be weaker in 2020.

There were contrasting views regarding battery grade lithium carbonate prices in 2020, with opinions on price levels ranging from as low as Yuan 40,000/mt ($5,689/mt) to as high as Yuan 80,000/mt ($11,376/mt).

However, the majority of respondents expected prices to average between Yuan 45,000/mt and Yuan 65,000/mt.

In 2019, average prices for lithium carbonate and hydroxide were Yuan 68,471.20/mt ($9,749/mt) and Yuan 82,384.60 ($11,730/mt), respectively, according to Platts.

Notwithstanding declines in both sales and production of NEVs every month since July last year due to the rolling back of subsidies, the market does not expect the Chinese government to reintroduce them. Some 71% said China would continue with its current policy, which will see all subsidies for NEVs removed by the end of this year.

However, survey participants held mixed views regarding the impact of the removal of subsidies on the NEV market: 42% said the policy would benefit the NEV sector and 37% said it wouldn't.

Some respondents believed other supportive policies could be introduced, such as providing subsidies for the installation of charging piles and more support for dual-credit policies to encourage automakers to cut gasoline consumption.

China's domestic battery metals prices have continued to fall over the past year due to overcapacity and a slowdown in the growth of NEV output and sales. Australian lithium chemical producers have trimmed production in the face of falling prices.

China wants NEVs to comprise 25% of all new car sales by 2025.

For the outlook survey, Platts spoke to 25 companies, comprising 15 battery metals producers, three traders, four consumers and three investors. The survey was conducted over February 17-22.