Chinese Lithium Salt, Particularly Lithium Hydroxide Smelters Exploit Domestic-Overseas Price Spread For Lucrative Arbitrage to Cope With Plummeting Lithium Carbonate Prices in China

Chinese lithium carbonate smelters were able to make profits last year by using imported lithium concentrate in their production and selling lithium carbonate at a later time as lithium carbonate prices were in an upward trend, even when lithium concentrate import prices were higher than lithium carbonate prices.

However, this situation has completely reversed this year with the cliff-like fall in domestic lithium carbonate prices from last year's peak of 600,000 yuan/mt to the current less than 200,000 yuan/mt.

As it normally takes one month and a half for overseas lithium concentrate to arrive in China, the average price of battery-grade lithium carbonate on April 14 (192,500 yuan/mt) and spodumene concentrate (6%) CIF China on March 1 ($5,300/mt) are used to illustrate the profitability of domestic lithium carbonate smelters who use imported spodumene concentrate as raw materials.

Based on this calculation formula, importing lithium concentrate and then making it into lithium carbonate for sale in the domestic market would incur losses of up to 163,100 yuan/mt.

in terms of lithium hydroxide, overseas lithium hydroxide prices are relatively firm and more than 50,000 yuan/mt higher than prices in China, providing room for arbitrage.

Data from Fastmarkets showed that lithium hydroxide prices averaged $48.5/kg or 334,700 yuan/mt on April 13. On the same day, Mysteel showed that the average lithium hydroxide price in China was 283, 000 yuan/mt.

Some lithium salt smelters are now producing battery-grade lithium hydroxide using industrial-grade lithium carbonate through a process that is called causticisation and the processing costs are less than 20,000 yuan/mt. They then sell them to the overseas market, which could bring an arbitrage room of up to 100,000 yuan/mt.