Whether Lithium Carbonate Prices Could Peak in H2 Depends on Three Facets

SHANGHAI, Jun 2 (SMM) - Battery-grade lithium carbonate prices reversed its previous trend and began to move upwards since July 2020. The material experienced two arounds of hikes and surged to a historical high of over 500,000 yuan/mt in March this year. However, since the end of March 2022, the prices of both battery-grade and industrial-grade lithium carbonate have begun to decline. As of June 1, the average spot price of domestic battery-grade lithium carbonate stood at 463,500 yuan/mt. The question now comes as whether the decline is related to the fundamentals of lithium carbonate.

Lithium carbonate supply-demand balance

According to SMM supply-demand balance, lithium carbonate was in serious shortage in January and February this year, and became oversupplied in March, April and May, and reached a high in May. Against the backdrop of increasing supply and decreasing demand, lithium carbonate prices began to fall during this period.

Based on the current situation, lithium carbonate prices were relatively stable or even dropped to some extent in the second quarter. The supply and demand is expected to be relatively balanced from July to October, in which case the prices are unlikely to rise or fall steeply.

SMM expects that the supply of lithium carbonate will be quite tight in the fourth quarter, and the annual peak of lithium carbonate prices will be subject to the production cuts in Qinghai due to cold weather in the last quarter of 2022, coupled with the expected rush for production in the new energy vehicle sector and seasonal high in the electronics sector around year-end. SMM expects the lithium carbonate market will post palpable supply tightness in the fourth quarter.

Specifically, the supply of lithium carbonate demonstrates obvious seasonal varieties. The major producing provinces include Qinghai, Sichuan and Jiangxi.

In Qinghai province, because of its high altitude and latitude, there is a high probability of production cuts due to low temperatures from every November to the following March. Production of lithium carbonate in January and February is expected to be around 30% lower than in October.

Companies in the Jiangxi and Sichuan also tend to overhaul their equipment in winter or in the first quarter, which generally affects 10% to 15% of capacity.

So overall, lithium carbonate production will be reduced significantly from November to the following February, with a maximum possible reduction of 30% to 40%.

But on the demand side, new energy vehicle manufactures would often rush to produce around year-end to polish their annual performance. Therefore, on the backdrop of falling supply and surging demand, lithium carbonate supply shortage will be extremely palpable at the end of the year or early next year.