Lithium Salt Price Growth in Contrast after Surging on Supply Shortage in Feb

SHANGHAI, Mar 17 (SMM) - The average monthly price of battery-grade lithium hydroxide was 422,215 yuan/mt in February, up 28% month on month. The downstream is expected to bear higher costs in March, containing the purchasing demand.

At the beginning of the month, the market was in a wait-and-see mood post the Chinese New Year (CNY), but the restocking demand was obvious, hence there were transactions under small orders. The prices of battery-grade lithium carbonate mostly stood between 388,000-396,000 yuan/mt. A few enterprises raised their offers to 395,000-430,000 yuan/mt. Prices were still on the rise in anticipation of sustaining restocking demand in February and March.

In the middle of the month, the downstream LFP capacity expanded significantly, and the inquiries for lithium carbonate remained high. As such, domestic lithium carbonate quotations continued to rise. The transaction prices of mainstream enterprises were around 430,000-440,000 yuan/mt, and the quotations of some small and medium-sized enterprises added to 450,000-470,000 yuan/mt.

At the end of the month, due to production cuts for maintenance of the LFP capacities due to the lack of lithium sources to varying degrees, the purchasing enthusiasm cooled. On the other hand, under the pressure of surging cost caused by the rapid rise in lithium prices, battery and material companies have adopted a strategy of "abolishing the purchases" of lithium carbonate exceeding 470,000 yuan/mt, heating the short-term upstream and downstream wrestling.

The average monthly price of battery-grade lithium hydroxide was 360,125 yuan/mt in February, up 34% month on month. The supply tightness is expected to extend into March when large-sized lithium salt enterprises are under maintenance.

At the beginning of the month, domestic mainstream smelters went into annual maintenance in late February, and the supply dropped to some extent. Meanwhile, the pricing model has gradually shifted to pricing based on high lithium carbonate prices. Furthermore, as top-tier smelters have a high concentration rate that accompanies strong pricing power, the quotations showed an upside trend on the whole.

In the middle of the month, some of the transactions reported by mainstream manufacturers were around 370,000 yuan/mt, and the quotations went up further to 400,000-410,000 yuan/mt. On the supply side, the top-tier smelters started their annual overhaul in February, which is expected to end in mid-to-late March. On the demand side, there was an obvious pullback in demand after the high time of high-nickel battery instalment ahead of the Chinese New Year. Nonetheless, the drop in supply was greater than that in demand, resulting in an enlarged lithium hydroxide supply void in February that later led to a significant price hike.

At the end of the month, domestic battery companies' demand for high-nickel materials climbed slightly. High-nickel cathode material companies are expected to increase their production slightly in March-April. At the raw material supply side, the mainstream lithium salt manufacturers have reduced their supply due to maintenance, and the downstream purchasing pressure has been far too great under intensifying supply tightness. Recently, there has been intensive hoarding activities across the downstream, hence the transaction prices rose sharply.

China’s output of battery-grade lithium carbonate stood at around 9,927 mt in February, a month-on-month increase of 5% and year-on-year increase of 37%. Domestic mainstream manufacturers resumed normal production after the overhaul was completed in February. In addition, some of the newly added capacities were fuelled by high lithium prices and actively ramped up their production, facilitating market supplies. However, due to the shortage of spodumene concentrate faced by small and medium-sized enterprises, their production was still suspended. In March, the supply from the brine lake system is expected to rise slightly. At the same time, raw materials for toll manufacturing will arrive at ports soon, hence the output may increase as a whole. China’s battery-grade lithium carbonate output is expected to stand at 13,147 mt in March, up 32% MoM.

On the demand side, domestic demand for battery-grade lithium carbonate decreased by 8% month-on-month in February. In terms of LFP, due to the shortage of lithium carbonate, top-tier enterprises slightly reduced their operating rates, and the demand continued to decrease slightly from the previous month. In terms of ternary materials, some small enterprises were shut down during the Spring Festival due to the difficulty in purchasing lithium salts, resulting in a 10% drop in demand for lithium. In terms of LCO, some enterprises were also restricted by the supply of upstream raw materials, pulling down the output, and demand weakened as well. Demand from LFP will still be subject to raw material prices, but the demand from ternary material sector may recover under supplementary supply of imported lithium materials. It is expected that overall battery-grade lithium carbonate demand may increase slightly by 4% in March.