[SMM Analysis] Lithium Carbonate Market Experienced A Roller Coaster in  2024. What’s the Outlook for 2025?

I. Price Review

2024 was a highly volatile year for lithium carbonate prices. Although not as dramatic as the "free fall" from 500,000 yuan/mt to 100,000 yuan/mt in 2023, lithium carbonate prices in 2024 experienced a "roller coaster" ride due to cyclical supply-demand mismatches and occasional overseas export rushes. The highest price reached around 110,000 yuan/mt, while the lowest dropped to 72,000 yuan/mt, with an annual average of 90,000 yuan/mt. Following the saying "after all the ups and downs, it still returns to 90,000," the annual average price for 2024 once again settled at 90,000 yuan/mt.

Phase-by-Phase Price Review:

January–Early February 2024
In the short term, futures prices were higher than spot prices, prompting some lithium chemical plants to transfer to delivery warehouses and strengthening their sentiment to stand firm on quotes. In late January, some cathode plants, considering logistics disruptions during the Chinese New Year, conducted minor pre-holiday restocking, slightly boosting lithium chemical prices.

Late February–Early April 2024
Environmental protection checks in Jiangxi, combined with maintenance and production cuts at major lithium chemical plants in Sichuan, led to expectations of short-term supply reductions post-holiday. Additionally, a price war in the EV sector and demand surges driven by new car models in March pushed up spot lithium chemical prices. Some lithium chemical enterprises stood firm on quotes and were reluctant to sell, resulting in a scarcity of low-priced cargo in the spot market and a steady price increase.

Late April–Late August 2024
Upstream lithium chemical supply remained at high levels, but the slowdown in new energy terminal demand growth led to reduced production schedules at cathode plants. Most cathode plants maintained high lithium chemical inventory levels in Q2, and long-term contracts and customer-supplied volumes recovered significantly from May to July. Spot orders were mainly just-in-time procurement, with no plans for additional restocking. The spot lithium carbonate market was relatively quiet, and prices declined steadily.

Early September–Late November 2024
In September, significant production cuts at major lithium chemical plants in Jiangxi notably impacted downstream customer supply. Coupled with rising downstream production schedules and widespread pre-holiday restocking for the National Day, spot procurement demand for lithium carbonate increased significantly, slowing the price decline and causing slight fluctuations and rebounds. From late October, year-end rushes for installations by end-users boosted production schedules at downstream material plants and upstream smelters, leading to more active spot transactions and a slight rebound in transaction price centers for lithium carbonate in October and November.

Early December–Late December 2024
The price rebound encouraged upstream smelters to ramp up production, resulting in a continuous increase in domestic lithium carbonate supply. However, during the negotiation period for 2025 long-term contract discounts, upstream lithium chemical plants maintained strong sentiment to stand firm on quotes for both long-term contracts and spot cargo. In December, downstream material plants began pre-holiday restocking, while traders, facing high inventory levels, aimed to destock and recover funds by offering lower prices to downstream material plants. Market transactions were relatively active, and prices showed a slight downward trend.

II. Supply-Side Review

1. Domestic Production

In 2024, China's total lithium carbonate production reached approximately 680,000 mt, up 47% YoY. By raw material type, spodumene-derived output accounted for nearly half of the total, with a share of about 48%, up 116% YoY. This was mainly driven by the commissioning of new production lines at integrated lithium chemical plants and the shift of some lithium hydroxide production lines to lithium carbonate due to weak lithium hydroxide demand and a widening lithium carbonate-lithium hydroxide price spread, significantly increasing lithium carbonate output from spodumene. Lepidolite-derived production growth slowed, up 17% YoY, due to high cost pressures, environmental protection issues, and tight supply of high-grade lepidolite in Jiangxi. Salt lake-derived production, benefiting from cost advantages, increased by 37% YoY. Recycling-derived production declined by 19% YoY, accounting for only 10% of the total, due to structural shortages of raw materials caused by regional mismatches in waste battery resources and underutilized capacity amid profit pressures.

From the current CR5 market share changes, the concentration of lithium carbonate enterprises remains relatively low, with many industry participants. With the continuous addition of new capacity, industry concentration further declined.

2. Imports

According to customs data, China's lithium carbonate imports in 2024 totaled approximately 230,000 mt, up 46% YoY. Chile and Argentina remained the main sources, with imports from Chile at about 180,000 mt (up 29% YoY, accounting for 78% of total imports) and from Argentina at about 45,000 mt (up 156% YoY, accounting for 20% of total imports).

On the export side, China's lithium carbonate export share remained small, and overall overseas demand showed no significant improvement. Overseas salt lake lithium carbonate production costs were relatively more competitive, with China's lithium carbonate exports totaling less than 5,000 mt in 2024.

III. Demand-Side Review

Driven by the booming NEV and ESS markets, China's lithium carbonate demand in 2024 reached approximately 850,000 mt LCE, up 44% YoY. By application, 67% was used for LFP cathode material production, and 12% for ternary cathode material production. Ternary cathode materials saw a decline in both market share and lithium carbonate consumption. On one hand, domestic NEVs increasingly favored LFP battery cells, while the ESS market expanded its share due to the high safety of LFP battery cells. On the other hand, the growing share of high-nickel content in ternary 6-series materials reduced lithium carbonate consumption.

On one side, policy uncertainties stemming from the US presidential election led domestic battery cell enterprises to rush for overseas exports in Q4 2024. On the other side, the continuous strengthening of China's trade-in policy and promotional activities by local governments and enterprises boosted car sales enthusiasm. With domestic and overseas demand exceeding expectations, the post-September-October peak season ushered in an even more prosperous November-December, with demand reaching its annual peak.

However, the rush effect from the US election only advanced future demand, and while the recent surge was strong, it may have overdrawn long-term demand, with overseas export volumes expected to pull back in the future.

IV. Supply-Demand Balance

In 2024, lithium carbonate continued to experience inventory buildup, with an annual surplus of approximately 60,000 mt and cumulative inventory of about 110,000 mt (sample statistics). On one hand, significant production cuts at a major lithium chemical plant in Jiangxi in early September led to a noticeable reduction in lithium carbonate supply. On the other hand, the unexpected demand surge during the peak season from September to November resulted in destocking. Overall, the supply surplus persisted.

V. 2025 Outlook

Demand side, China remains the leading country for NEVs and ESS. In the NEV market, the Central Political Bureau's meeting on December 9 indicated that the policy environment in 2025 would remain favorable for the healthy development of the automotive industry. Additionally, as 2025 marks the final year of the 14th Five-Year Plan, consumer demand for car replacements is expected to surge. SMM holds an optimistic outlook for 2025 car sales, forecasting growth of over 20% for the year. In the ESS market, driven by policy support, China's performance in 2025 is expected to remain strong, with growth also projected at over 20%.

Supply side, the current operating rate of upstream lithium chemical plants is only 50%-60%. With additional new capacity expected to come online in 2025, domestic lithium carbonate production is projected to grow by over 25%. The industry's integration level is expected to deepen over time. Meanwhile, with the continuous release of overseas lithium carbonate capacity and slower overseas demand growth, the surplus of overseas lithium carbonate will intensify, leading to more low-cost lithium carbonate entering the Chinese market. This will pose resistance to production increases at high-cost lithium chemical plants, potentially leading to production cuts or market exits.

In 2025, both lithium carbonate supply and demand are expected to grow, but supply growth will outpace demand, further expanding the annual surplus. Lithium carbonate prices are likely to face downside room. Although current prices are already near the cost line for some lithium mines, strong sentiment among lithium miners to stand firm on quotes may provide some cost support. However, with the deepening of low-cost integration in the industry and increasing imports, the price center for domestic lithium carbonate is still expected to decline. The industry's hope for lithium carbonate to return to 100,000 yuan/mt may remain a distant dream.