The Path to Finding the Bottom for Lithium Carbonate

Lithium carbonate upstream and downstream enterprises generally hold a pessimistic attitude:

1. There is a consensus that the supply of lithium carbonate exceeds demand,

 but due to the increase in the proportion of self owned mines, there is no obvious willingness to reduce production, 

and it still needs to follow the logic of price decline to clear production capacity;

2. At present, the price of lithium ore is still linked to the prices of lithium carbonate and lithium hydroxide. 

However, based on the current Australian ore prices, smelters do not make any profit. 

Taking into account capital costs, shipping schedules, etc., one ton may lose around 10000 yuan/ton.

3. Downstream believes that without a decrease in customer supply, it is difficult for prices to have a decent rebound. 

At the same time, they are also concerned that a sudden decrease in customer supply may lead to active market free procurement and become the trigger for price increases;

4. The market is very concerned about the "bottom" of lithium carbonate in the second half of 2024. 

The current view is that it will continue to decline, and it is believed that it will drop to 75000 yuan/ton.

5. The inventory pressure of the sample smelters for communication and research is not significant, and the implementation of long-term agreements is very good. 

The inventory of lithium salt plants without long-term agreements is basically transferred to traders and term traders.

So, an interesting phenomenon emerged in the market: lithium carbonate from low-priced and high-quality smelters is still difficult to buy; 

There are many spot goods available in the market, but there are few inquiries from customers, making it difficult to obtain them. Some customers can only register warehouse receipts. 

However, downstream testing of warehouse receipts may have some impact on existing usage habits. 

In the case of sufficient stock, priority should still be given to negotiating procurement with capable smelters. 

But there are still price cutting behaviors, because the discount on raw material pricing for battery end customers is still 10%,

 but due to the high proportion of customer supply in recent times, the pressure on positive electrode factories is relatively small.

Continuing to oscillate and search for a bottom, the fundamentals of lithium carbonate have not shown significant improvement, but there is a marginal improvement. 

On the demand side, the production of ternary materials improved in July, while the production of lithium iron phosphate remained stable. 

The production of lithium carbonate exceeded the release peak, or due to raw material inversion or summer maintenance, 

the production of lithium carbonate in July is expected to remain stable or slightly decrease. 

The pressure of lithium carbonate accumulation has weakened, and there is marginal improvement, but it is still difficult to see substantial destocking in July.

On the other hand, in the third quarter of last year, although there was a real destocking, it did not affect the smooth decline of prices. 

So the accumulation of inventory is one aspect, and absolute price is another. 

Multiple factors are intertwined, and lithium carbonate will continue to fluctuate and seek a bottom, taking one step at a time. 

Focus on the reduction of production in large-scale smelters and changes in downstream customer supply ratios and volumes.

Since mid May this year, the price of battery grade lithium carbonate has continued to decline.

 Moko, Chief Analyst of True Lithium Research, pointed out that there has been no significant change in the supply and demand sides of the market in recent times. 

Although some projects in Argentina expanded production in July, it was still planned and there was no unexpected increase in supply in the market. 

However, some downstream manufacturers have provided production guidance in advance, 

which shows that there was no significant increase in demand for battery grade lithium carbonate in August, and the market has a strong wait-and-see sentiment. 

This supply-demand imbalance has led to a continuous decline in the price of lithium carbonate.

Faced with the current market situation, enterprises in various links of the lithium battery industry chain need to re-examine their business strategies. 

Upstream lithium salt enterprises may need to strengthen cost control and improve production efficiency;

 Midstream battery manufacturers need to increase their technological innovation efforts and enhance product competitiveness;

 Downstream new energy vehicle and energy storage enterprises need to ensure quality while reasonably controlling costs to cope with possible market fluctuations. 

Only in this way can we stand firm in this round of industry reshuffle and lay the foundation for future development.