Recently, the domestic lithium chemicals market has accelerated its decline, with the price center of lithium carbonate continuing to fall. The most-traded lithium carbonate futures contract dropped to a record low of 62,560 yuan/mt. This week, lithium carbonate futures prices stabilized and rebounded. As of the close on May 14, the most-traded contract was reported at 65,200 yuan/mt, up 3%.
Zhang Weixin, an analyst at China Securities Futures, believes that the current lithium carbonate market is still oversupplied. Yang Fei, a senior researcher at the Non-Ferrous Metals and New Materials Team of CITIC Futures, stated that the recent stabilization of lithium carbonate futures prices is mainly due to substantive progress in high-level economic and trade talks between China and the US, which has warmed market sentiment. Although China's lithium carbonate exports to the US are extremely low, the US is China's largest export market for ESS batteries. The mutual cancellation of hefty tariffs by China and the US indirectly benefits the lithium industry chain.
It is reported that after the US imposed tariffs, the cost of US imports of Chinese ESS parts increased by over 145%, which means a significant decline in profits for US energy storage system integrators. "The US has pledged to remove 91% of tariffs and suspend the implementation of 24% reciprocal tariffs. Although the absolute value of tariffs remains high, if Chinese battery cell export enterprises, US energy storage system integrators, and project investors each bear a portion of the tariff costs, all parties are expected to be profitable," Zhang Weixin believes. Based on this, the outlook for US energy storage demand is expected to improve.
However, the US accounts for less than 20% of global ESS installations. Zhang Weixin believes that even considering that shipments are higher than installations, the potential demand increase from tariff reductions may range from 10,000 to 25,000 mt of LCE, having a relatively small impact on the supply-demand pattern. Therefore, although tariffs have decreased, it is difficult to change the overall oversupply situation in the market, and battery cell shipments may not see significant improvement.
From a fundamental perspective, market participants believe that even if macro sentiment improves, lithium carbonate prices will continue to fluctuate at lows in the short term. Yang Fei believes that the recent weakness in lithium carbonate prices is mainly due to the deterioration of the supply-demand structure. From the supply side, as of the week ending May 9, the weekly production of lithium carbonate rebounded on a WoW basis. Coupled with the recovery of lithium ore imports and the release of domestic ore capacity, market supply pressure has increased significantly. More importantly, lithium carbonate is still in an expansion cycle in 2025. According to statistics from Wang Chuhao, an analyst at Chang'an Futures, in Q1 2025, the commissioning process of new lithium resource projects both domestically and overseas proceeded smoothly. The capacities of new projects such as Goulamina, Kamativi, and Dahongliutan began to ramp up. Overall lithium resource supply in 2025 is expected to increase, and the oversupply pattern is difficult to reverse.
From the demand side, the growth rates of cathode material and NEV production have slowed significantly, and demand expectations for May-June are expected to be mediocre. Wang Chuhao stated that in May this year, although the production schedules of cathode material plants increased MoM, there was no significant restocking behavior observed downstream. The market sentiment remained cautious, with large price spreads, and downstream players continued to make just-in-time procurement, with no significant improvement on the demand side.
On the cost side, Zhang Weixin believes that after lithium ore prices rapidly fell below $800/mt and approached $700/mt, the current ore prices are insufficient to force the industry to undergo large-scale capacity exits. The "ore prices - lithium chemicals prices" downward spiral is likely to continue. Yang Fei also believes that the current social inventory has not significantly decreased, and lithium ore prices have not yet broken out of the downward trend.
Has the price of lithium carbonate hit bottom? "The cycle for macroeconomic expectations to warm up and transmit to lithium chemicals consumption is relatively long, and ESS battery cell exports still face additional tariff pressures." Zhang Junrui, an analyst at Hongze Research, believes that lithium carbonate is more influenced by its own industry fundamentals. Before the market expectation of oversupply changes, lithium prices are likely to remain in the doldrums.
Zhang Weixin also stated that the factors that can stabilize lithium carbonate prices still need to be found on the supply side. The fundamental logic behind the current decline in lithium carbonate prices is capacity exits. Achieving capacity exits through market-oriented means implies that prices need to fall below some supply costs, forcing these suppliers to cut losses and exit the market. Only when new production reduction or suspension projects emerge in the market can lithium carbonate prices truly stabilize.
