SMM Analysis: Lithium Carbonate Futures Hit Daily Upside Limit after Persistent Slump, Potential Supply Changes Deserve Attention as Smelters Are Plagued by Severe Losses

Lithium Carbonate futures fell 17 out of 18 trading days, hitting daily downside limits on Nov 22, Nov 27, Dec 5. Today, after frequent record lows, the most-traded contract surged by 6.99%, closing at 95,600 yuan/mt—a daily upside limit. Other contracts also hit the daily upside limit.
Regarding lithium carbonate's frequent past drops and today's sudden spike, the prior fall was largely due to bears at upper hand over bulls. Now, futures are re-aligning with spot prices, causing a notable rebound in lithium carbonate futures.
Per SMM, as of December 7, the spot price for domestic battery-grade lithium carbonate ranges between 115,000 and 126,000 yuan/mt, averaging 120,500 yuan/mt.
Despite lithium carbonate futures rebounding, market fundamentals remain unchanged with strong supply and weak demand. Lithium salt companies focus on bulk deliveries as individual order prices continue to drop. Some salt lake companies sell lithium carbonate at low prices.
Chile exported 13,592 mt of lithium carbonate to China in November, down 19.05% month-on-month, and up 35.04% year-on-year. Due to the long shipping time, there is a time lag between China’s imports of lithium carbonate from Chile and Chile’s exports of lithium carbonate to China. In October and November, Chile’s exports of lithium carbonate to China were 16,791 mt and 13,592 mt respectively. China’s imports of lithium carbonate averaged 12,137 mt per month from January to October. It is expected that China’s lithium carbonate imports will remain at a high level in November and December, which will increase supply in the domestic market.
SMM research reveals that due to weak end-user demand, cathode factories' orders dropped significantly. Amid price falls, cathode companies mostly adopted a wait-and-see approach, restocking sporadically at low prices. Some aim to deplete their raw material stocks by year's end, impeding short-term procurement demand. However, recent market research shows a shift in procurement sentiment among some downstream cathode companies, with occasional small purchases from traders at relatively low prices.

Meanwhile, the current drop in lithium carbonate prices pressures high-cost lithium salt businesses, with many upstream factories incurring losses. Market reports suggest a particular lithium salt firm had to reduce output due to continuous losses, future production plans now being driven solely by long-term sales volume.
Moreover, while some lithium salt firms that carried out maintenance in October won’t need immediate further maintenance, typically around February is their seasonal maintenance time. Some plan to halt production for January maintenance. Given the ongoing substantial losses from externally procured lithium ore, future maintenance and production plans of high-cost lithium salt companies dependent on externally sourced ore will notably affect domestic lithium carbonate supply dynamics.

Moving forward, monitoring high-cost lithium salt companies' production schedules amid sustained losses is crucial. SMM will continue tracking these developments. In the short term, the market's reception of major salt lake factories' shipments also warrants attention.