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Lithium carbonate prices rallied on tight supply
Mar 5,2020 15:38CST
smm insight
Source:SMM
SMM assessed industrial-grade lithium carbonate at 38,000-42,000 yuan/mt as of Thursday March 5, up 3.9% from multi-year lows of 37,000-40,000 yuan/mt.

SHANGHAI, Mar 5 (SMM) – Prices of industrial-grade lithium carbonate rallied after the Lunar New Year holiday, on tighter supply as the COVID-19 outbreak subdued production and disrupted deliveries and as demand improved.

 

SMM assessed industrial-grade lithium carbonate at 38,000-42,000 yuan/mt as of Thursday March 5, up 3.9% from multi-year lows of 37,000-40,000 yuan/mt, where prices remained for much of January and early February.  

 

Meanwhile, prices of battery-grade lithium carbonate inched up 0.5% to 47,500-50,500 yuan/mt while prices of battery-grade lithium hydroxide coarse particle rose 2.8% to 53,000-59,000 yuan/mt.

 

Government measures to contain the spread of the epidemic closed plants and roads. SMM research found that operating rates at lithium carbonate producers in the major producing hub of Jiangxi province, in east China, were less than 20% last month. That kept inventories of finished goods at industrial-grade lithium carbonate producers in Jiangxi from rising from low levels, after some cathode materials producers stockpiled ahead of the Lunar New Year holiday.

 

A large-scale lithium carbonate producer in Jiangxi is shifting production from industrial-grade to battery-grade, which added to the short-term tightness in the industrial-grade lithium carbonate market.

 

Aside from tight supply, higher transportation costs and logistical constraints also forced buyers to accept higher prices.

 

Some industrial-grade lithium carbonate producers, meanwhile, held back sales in a bid to boost prices and ease cost pressure, after major lithium salts producers hiked their offers. Prices dropped to multi-year lows ahead of the Lunar New Year holiday, as some producers rushed to discharge cargoes to recover cash flows.   

 

Demand recovery also gave a lift to prices of lithium salts, especially from industrial sector and lithium manganese oxide (LMO), while demand from power battery sector remained sluggish. Some downstream consumers did not make large stockpiles ahead of the holiday, due to concerns about cash flows and bearishness on lithium salts, and they had to accept the price increase after supply tightened.

 

Subdued production prompted producers in Jiangxi to be the first to raise prices of lithium salts, while limited producers in Qinghai, where has been little hit by the epidemic, managed to lift prices. Compared to salt lake lithium, lithium salts produced from lepidolite are favoured by battery-related consumers thanks to product consistency and low content of impurities.

 

When it comes to March, smelters in Jiangxi and Sichuan are expected to recover production to normal and some newly-commissioned projects will ramp up, which will ease supply tightness and dent upward momentum in prices of lithium salts.

 

Some downstream consumers expedited their procurement of lithium salts on concerns about supply amid the epidemic outbreak, and future support from demand recovery is likely to wane.

 

For ternary material producers, operations are expected to remain subdued until the middle of March, and they do not have much room to accept higher lithium salts prices given lingering cost pressure across the battery market.

 

The virus outbreak in South Korea and Japan, meanwhile, dampens the prospect of lithium salts demand recovery. SMM learned from some cathode materials producers that South Korean buyers are considering delivery delay or procurement cuts. Exports of lithium salts and cathode materials in the second quarter are set to take a hit if the outbreak fails to be effectively controlled in the short term.

Market commentary
Lithium hydroxide
Lithium carbonate
Lithium
COVID-19
Coronavirus impact

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