SHANGHAI, Mar 31 (SMM) – Prices of industrial-grade lithium carbonate eased on Monday March 30 after remaining firm for most of March, showed SMM assessments. However, battery-grade lithium carbonate prices are expected to face greater headwinds in the future than prices of industrial-grade lithium carbonate, on the backdrop of high inventories at smelters and the slow return of power battery demand.
SMM expects the price spread between the two types of lithium carbonate to narrow to 3,000-5,000 yuan/mt in the short term, given a lack of significant improvement in the quality of low-cost lithium extracted from salt lake brines. Costs of spodumene concentrate, another raw material used to produce lithium salts, will cap the downsides of battery-grade lithium carbonate prices as the cif prices of seaborne spodumene have slipped to $450/mt as of March 31.
SMM assessed prices of domestic battery-grade lithium carbonate with a grade of 99.5% at 45,500-48,500 yuan/mt as of March 31, down 750 yuan/mt from a week ago. Prices of domestic industrial-grade lithium carbonate with a grade of 99.2% stood at 38,000-41,000 yuan/mt on March 31, 500 yuan/mt lower from March 27, after prices held flat at an average 40,000 yuan/mt during March 5-27.
On battery-grade lithium carbonate front, producers that adopt the processing of spodumene, a mainstream method to produce lithium carbonate in China, restarted work at a fast pace after the CNY holiday. This, coupled with the weaker-than-expected resumption of end-user demand as some consumers turned to low-cost raw materials, pushed up inventories of battery-grade lithium carbonate.
An SMM survey found that the operating rates of Chinese lithium salts producers that use spodumene as raw materials have climbed to 50%, from 30% in February. The operating rate of mica-consuming lithium salt producers has resumed to 50%, from less than 10% last month. Amid gradual ramp-up of capacity, producers that extract lithium from salt lake brines are running at a rate of 40%.
Inventory of industrial-grade lithium carbonate also accumulated as major producers in Qinghai held cargoes back from the market after the CNY holiday without winding down operations.
SMM learned that most Chinese lithium carbonate plants have inventories on hand that could take more than two months to deplete.
Some companies currently focus on adjusting their production strategies and scaling back output of battery-grade lithium carbonate, while some plants tend to ease inventory pressure by cutting prices.
Besides rising inventory pressure, prices of lithium carbonate will also face challenges of intensified market competition with the entry of overseas salt lake brines for lithium extraction.
Moreover, the worldwide outbreak of COVID-19 grew uncertainties about the demand recovery in the EV markets of China and European countries and sparked some concerns about ore supply disruption from Africa.
SMM expected near-term prices of industrial-grade lithium carbonate to face downside risk as some battery-grade lithium carbonate plants have shifted their capacity to industrial-grade materials as the COVID-19 outbreak seems to have weakened consumer battery demand.