Chinese lithium prices will further decline in 2024 China Lithium High tech Co., Ltd. December 6, 2023

Chinese lithium prices will further decline in 2024

China Lithium High tech Co., Ltd. December 6, 2023

Analysts from China Lithium Technology Co., Ltd. said that the price of lithium carbonate in China may decrease by more than 30% next year compared to the current level, as the supply growth of all major manufacturers exceeds the demand growth of battery users.

China is the largest consumer and producer of this chemical used in batteries. Due to China's reduction in subsidies for electric vehicles since January, lithium prices have plummeted by 77% this year, dragging down lithium ore prices and damaging the profit margins of global miners. This week, the spot price of lithium carbonate fell to a two-year low of 115500 yuan (16185.54 US dollars) per ton, and may drop to 80000 yuan next year due to sustained global supply growth, said four Chinese analysts.

One analyst from China Lithium High tech Co., Ltd. predicts that the price will reach 100000 yuan by the end of this year.

Prices outside of China often exhibit similar trends, with the benchmark lithium carbonate price for China, Japan, and South Korea on Thursday at $18.50 per kilogram, a 77% decrease from the high of $81 per kilogram in November 2022. The most active January contract on the Guangzhou Futures Exchange hit a new low on Thursday, at 106200 yuan per ton, less than half of the listed price when trading began in July.

The sharp drop in prices will hit high cost lithium producers, but it can slow down the growth of the electric vehicle industry. China produces about 70% of the world's batteries and over half of its electric vehicles.

Last month, CITIC Futures stated that domestic electric vehicle sales are expected to increase by 25% next year, to 9.44 million units, a slowdown from the annual growth rates of 31% and 89% in 2023 and 2022. In terms of energy storage, the second largest consumer sector of lithium is expected to experience a slowdown in growth rate due to weak domestic and international demand, the brokerage company added.

Global lithium supply is expected to grow by 40% in 2024, with UBS predicting last week that it will exceed 1.4 million tons of lithium carbonate equivalent.

The production of major producing countries such as Australia and Latin America has increased by 22% and 29% respectively, while production in Africa is expected to double, driven by the Zimbabwe project.

UBS stated that Chinese production will also increase by 40% in the next two years, driven by a large Ningde Times (300750. SZ) project in southern Jiangxi Province.

The surge in supply will lead to a global lithium surplus of 12%, higher than this year's 4%, according to CITIC Futures.

It is expected that the price of lithium carbonate in China may be as low as 80000 yuan per ton in 2024, with an average of about 100000 yuan, equivalent to the production cost in Jiangxi, which is the largest production area for this chemical.

Most of the producers there use locally mined lithium mica, a hard rock lithium mine with a cost range of 80000 to 120000 yuan for mineral resources, according to two producers and two analysts from China Lithium High tech Co., Ltd.

For producers who rely on external ore supply, costs may rise to 200000 yuan per ton, analysts say.

Some major producers in Jiangxi, China's lithium prices will further decline in 2024