Unraveling the Sustained Drop in Lithium Carbonate Prices from Fundamentals Perspective

At the beginning of Q2 2025, the lithium carbonate market continued its downturn, with prices hitting a new low. As of April 22, the most-traded lithium carbonate futures contract fell below the 68,000 yuan/mt threshold, marking a decline of over 15% from the year's peak. Behind this price fluctuation lies the intensifying structural imbalance between demand growth lagging behind supply expansion, compounded by multiple pressures such as high inventory levels and weakened cost support. This article will delve into the core driving logic of the lithium carbonate market from dimensions including supply and demand fundamentals, inventory cycles, cost transmission, and policy disruptions, and will also provide an outlook on future price paths.

Supply Side: Capacity Release Cycle, Slow Exit Process
1. Domestic Production Fluctuates at Highs, Short-Term Disruptions Fail to Alter Oversupply Situation
According to data from Fubao Information, as of the week ending April 17, the weekly operating rate of lithium carbonate enterprises stood at 53%, down 2 percentage points from the previous period, corresponding to a weekly production of 16,800 mt, down 2.33% from the previous period. The main reasons for the decline were the shutdown of some lithium chemical plants and production line maintenance.

Despite a 3.2% MoM decline in domestic weekly lithium carbonate production in April, the production remained at historically high levels. According to industry surveys, the maintenance or shutdown of some lithium chemical plants only disrupted the short-term supply, with the exit speed of smelting capacity significantly lagging behind market expectations. Currently, most lithium chemical enterprises adopt a "volume-for-price" strategy, diluting costs through large-scale production, resulting in insufficient willingness to cut production. It is worth noting that some small and medium-sized enterprises that externally purchase lithium ore have experienced sporadic production cuts due to losses, but their volume is limited, providing minimal relief to overall supply pressures.

2. More Overseas Lithium Carbonate Flows into China, Imports Remain High
The accelerated influx of overseas lithium carbonate into the domestic market has further intensified expectations of loose supply. Data shows that in March, Chile's lithium carbonate exports to China reached 16,600 mt, up 37.8% MoM; Argentina's total lithium carbonate exports in March were 8,400 mt, up 4.3% MoM and 93.4% YoY, including 6,300 mt exported to China, up 2% MoM and 67% YoY. Argentina's lithium carbonate exports surged YoY, with monthly exports to China basically maintaining above 5,000 mt in the past two quarters. Moreover, in early April, the CAEM stated that Argentina expects to increase lithium production by 75% in 2025, producing 130,800 mt of LCE, and it is anticipated that South American salt lakes will still be able to accelerate capacity release to some extent this year.

Currently, China's lithium carbonate import dependency is around 20%, which has declined somewhat, but the domestic market remains sensitive to fluctuations in external supply. At present, lithium carbonate from Chile and Argentina accounts for over 95% of China's total lithium carbonate imports. Combining shipping data from the two countries, it can be inferred that China's lithium carbonate port arrivals in the next 1-2 months are expected to be moderately high.

3. Weakened Cost Support, Declining Ore Prices Drag Down Lithium Chemicals Valuation
The continuous weakening of upstream lithium ore prices has further eroded the cost support for lithium carbonate. According to Fubao Information data, in mid-to-late April, the quoted price of spodumene (Australian SC6 CIF) fell to around $800/mt, down 8% from the early March peak. Market feedback indicates that the transaction price of African ore has dropped to $760/mt, and it may be difficult for Australian ore prices to find support, creating a negative feedback between ore prices and lithium chemicals: falling lithium chemical prices force miners to make concessions in price negotiations, while declining ore prices open up downside room for lithium chemicals. Currently, the port arrivals of lithium ore are relatively high, weakening the bargaining power of miners, and the cost side may struggle to provide effective support for lithium carbonate.

Demand Side: Demand Underperforms during Peak Season, Marginal Growth Slows
1. Cathode Materials: Limited Growth in Production Schedules, Demand Declines after Previous Stockpiling

Although the production schedules and actual operating rates of downstream cathode material enterprises in March and April showed a slight MoM increase, material plants mostly adopted a "buy the dip" strategy during the period, purchasing as needed and building small inventories. The traditional "golden March and silver April" peak season demand fell short of expectations. In April, the US tariff hike raised market concerns about a reduction in export orders. Although the short-term actual impact on the material side was limited, policy uncertainties led to a wait-and-see attitude among downstream enterprises, constraining lithium carbonate demand. Moreover, after flexible inventory building by material plants, it is equivalent to providing a "cushion" during price fluctuations.

2. Battery Cells and End-Users: Temporarily Maintaining a Relatively Optimistic Outlook
From a data perspective, the overall growth rate of NEV sales from January to March was relatively good. In March, China's NEV sales increased by 47.97% YoY, with a monthly penetration rate of 42.4% in March. Currently, the enterprise most affected by US tariffs is CATL, while other enterprises are less affected. Affected by carbon emission regulations, Europe may see bigger-than-expected installation demand this year, easing pessimistic sentiment among domestic battery cell manufacturers and the overall outlook is relatively optimistic.

Please note that this news is sourced from https://www.sci99.com/info/3_1000008_41857217.html and translated by SMM.