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Currently, shutdowns in the lithium carbonate industry are quite prominent, with the shutdown rate approaching half. According to data from SMM, as of June 19, the weekly operating rate of lithium carbonate enterprises was 48.16%, with the weekly operating rate of smelting enterprises at 53.64%.
The differentiation within the industry is becoming increasingly apparent. Top-tier smelting enterprises, with relatively better order situations, still maintain a high operating rate. Among small and medium-sized enterprises (SMEs) without significant cost advantages, many have been shut down for several months.
If we categorize lithium carbonate smelting enterprises into two types: integrated top-tier enterprises and high-cost SMEs, it is not difficult to find that the supply-demand relationship of top-tier enterprises' products is basically in balance or slightly in surplus, performing better than the overall industry level. Driven by factors such as falling ore prices and enterprises' participation in hedging operations, their cost support logic is also continuously weakening. Therefore, even if lithium carbonate prices fall below the cost, it may not necessarily lead to large-scale production cuts by top-tier enterprises.
In the first half of this year, battery cell production increased significantly YoY, far exceeding the same period last year, driving a significant increase in the operating rate of the upstream lithium iron phosphate (LFP) industry. According to data from SMM, from January to May, the total production of LFP battery cells was 476.03 GWh, up 75.64% YoY; the operating rate of LFP industry enterprises increased by over 60% YoY. However, with the traditional off-season for the industry approaching in July and August, battery cell enterprises have planned to reduce production in the next two months, and the production of the LFP industry is expected to decline. Meanwhile, in July and August, the lithium carbonate industry is still in a peak supply period, especially with the production of lithium extracted from salt lakes expected to remain high. Under the contradiction of weak demand expectations and sufficient supply, lithium carbonate prices will still face significant downward pressure in the short term.
Overseas supply contraction may become a key supporting factor for the long-term price of lithium carbonate. In May, the total imports of spodumene were approximately 605,000 mt, down 2.9% MoM, with the overall decline being limited. Moreover, imports from Australia and South America both increased by over 20% MoM. However, the imports of lithium carbonate have declined significantly. Customs data show that in May, China imported 21,145 mt of lithium carbonate, down 25.37% MoM, which is in line with the previous news that Chilean lithium chemical producers suspended shipments in May and requested a renegotiation of pricing. If the negotiations do not go smoothly, supply may further contract in June.
From a macro perspective, on June 24, six departments including the People's Bank of China jointly issued the "Guiding Opinions on Financial Support for Boosting and Expanding Consumption," introducing 19 measures, including explicitly promoting the expansion of commodity consumption, encouraging the provision of financial services for the trade-in of consumer goods, increasing credit support for relevant enterprises, actively developing auto loan businesses, and strengthening financial support for the production and consumption of green and smart home appliances and furnishings. These policies have, to a certain extent, boosted market sentiment and driven a slight rebound in lithium prices.
Overall, influenced by factors such as market sentiment and unexpected events, lithium carbonate prices may show signs of stabilizing in the short term. However, based on the current oversupply in the spot market, investors should not be overly optimistic about the rebound space and duration. It is expected that the core operating range of the most-traded 2509 futures contract will be between 57,000 and 63,000 yuan/mt in the medium to short term.
Please note that this news is sourced from https://www.cnmn.com.cn/ShowNews1.aspx?id=463092 and translated by SMM.
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