Lithium Carbonate: Can we break the ice in December?

In recent months, the lithium battery industry has faced significant challenges, with downstream orders being reduced, prices declining, and bidding prices being suppressed. The market is currently unable to respond to this situation in any other way.

In the past two days, rumours about top automobile manufacturers requiring some suppliers to lower prices by 10% starting from New Year's Day next year have caused fluctuations in the futures market sentiment, with many investors seeking opportunities below 70000 CNY.

Nevertheless, based on certain indicators, the market is expected to remain resilient in December of this year.

Firstly, the current market is already characterised by low prices for lithium carbonate and a limited number of manufacturers outside of salt lakes that are able to generate profits. A number of lithium mining companies in Australia and Africa have taken the initiative to limit or slow down their expansion pace. Furthermore, some new salt lake projects in South America and China have postponed their production time.

In China, the production of lithium carbonate saw a continued decline from September to October, while inventory levels decreased at a gradual pace over three consecutive months. Based on the current market inventory, and taking into account the continued growth of downstream demand, including so-called bad goods, the number of days' supply of lithium carbonate has decreased from around 50 days in May and June to less than 40 days. This has had a positive impact on market pressure.

Secondly, while the authoritative production schedule data for lithium batteries in December has yet to be released, the production and export situation of other industries (such as home appliances, steel, etc.) in December indicates that all industries are responding to the high probability of tax increases in the United States. It is therefore imperative to maintain short-term momentum. The lithium carbonate market is expected to maintain relatively strong demand from November to the first quarter of next year.

Furthermore, the current pricing strategy for lithium carbonate has a negligible impact on the lithium battery and new energy vehicle markets. Even if lithium carbonate is supplied at no cost, this may not be sufficient to offset the impact of price adjustments or subsidies on vehicle pricing. Furthermore, in recent days, car manufacturers have requested a 10% price reduction, which does not specifically relate to positive electrode materials.

It would be unwise to be overly optimistic about the trend of the domestic lithium carbonate market in December. As previously stated, the rebound in November was the result of a temporary imbalance between supply and demand, with a relatively short duration and limited scope.

It should be noted that the current production capacity reductions by lithium mining enterprises are mostly "expansion capacity" rather than "production capacity". It will take approximately a year for the actual impact on the market to become apparent. It would appear that the market for lithium carbonate has not yet reached its lowest point or begun to recover.

Furthermore, once lithium prices have rebounded significantly, we will be in a position to provide guidance on the market. The announcement by the Guangzhou Futures Exchange of a new delivery warehouse for lithium carbonate futures is likely to exert some pressure on the market.

In light of the aforementioned analysis, it is anticipated that the domestic lithium carbonate market will continue to experience fluctuations in December, with no indications of an outstanding performance.