SMM Analysis of Current Situation and Future of Lithium Salt Market

SHANGHAI, Mar 8 (SMM) -Since the middle of 2021, the price of lithium salt has kept rising rapidly. As of last week, the mainstream transaction price of battery-grade lithium carbonate rose to 500,000 yuan/mt, and that of battery-grade lithium hydroxide climbed to 460,000-480,000 yuan/mt, an increase of 79% and 106.5% respectively when compared with January 1, 2022, and the price difference between the two has narrowed further.

Lithium carbonate 

Supply: In February, many lithium salt factories were still under maintenance, and this coupled with a shorter month, resulted in low output. After entering March, lithium salt plants gradually returned to normal production, and the overall supply of lithium carbonate recovered. However, supply in the spot market is still tight as many lithium salt factories are delivering long-term orders after recovering from maintenance. 

Demand: Orders for NMC power batteries increased slightly in March. The current lithium salt inventory of most major NMC cathode material manufacturers can sustain their production for about 15-30 days. Due to the high price of lithium salt, NMC cathode material manufacturers are facing greater challenges in the capital turnover. The demand for NMC cathode materials from non-NEV sector remained weak, forcing many small NMC cathode material manufacturers and NMC cathode material manufacturers who are not oriented at the NEV market to lower their output, which helped ease lithium carbonate shortages to a certain extent. Therefore, in general, the demand for lithium salts from NMC cathode materials was relatively stable.

Many LFP plants have abandoned plans to purchase lithium salt at the current high prices, thus the tug of war between LFP plants and lithium salt plants has intensified.  Some LFP plants planned to reduce their production. In general, the demand for lithium salt has declined.

Despite falling demand, lithium carbonate supply is still in a shortfall. Some downstream producers restocked last week for production in March, allowing lithium carbonate prices to rise.  Given the strong wait-and-see sentiment, the price increase in lithium carbonate may slow down as most downstream buyers have basically stocked up enough raw materials for use in March. 

Lithium hydroxide:

Cost: Under the continuous upward trend of ore and lithium carbonate prices, the production costs of lithium hydroxide are still on the rise. Supply: Many lithium salt plants are still under maintenance this month, hence the overall supply is expected to remain at a low level. Most of the lithium hydroxide is locked under long-term orders, with very limited amounts of goods available in the spot market. In addition, nearly 70% of lithium hydroxide will be exported to other countries, which may further exacerbate the structural shortage of lithium hydroxide.

Demand: Some large battery makers will place orders for high-nickel battery materials in advance in March due to bullish sentiment on lithium hydroxide prices, which will boost demand for lithium hydroxide. 

Driven by low supply and growing downstream demand, the price of lithium hydroxide showed a rapid increase last week. The price increase of lithium hydroxide may outpace that of battery-grade lithium carbonate, and the price difference between the two may shrink further.