Frequent News Heightens Lithium Carbonate Price Volatility

On August 12, the futures price of lithium carbonate experienced a significant volatility. After opening significantly higher in the morning session and maintaining a strong upward trend, it surged again in the afternoon due to news-driven factors, with the most-traded contract seeing gains approaching 8%. As sentiment pulled back towards the end of the day, prices quickly corrected, with the most-traded contract LC2511 ultimately closing up 2% at 82,520 yuan/mt.

Against the backdrop of market attention triggered by the shutdown of CATL's Jianxiawo mine on August 11, the most-traded contract of lithium carbonate hit the daily limit across the board. Subsequently, as information about supply disruptions in Jiangxi's lithium ore sector was gradually digested, futures gains narrowed. An accident (an explosion in a pipeline carrying acidic solution) occurred at Albemarle Corporation's La Negra smelter in Chile, resulting in several casualties. This incident sparked renewed concerns in the market about supply disruptions. Although the company has not yet issued an official announcement, industry feedback suggests that some production lines at Albemarle Corporation may have been affected, with the specific impact volume and duration remaining unclear. Notably, on August 6, Chilean Congressman Guerrero sent letters to the Director of the National Mining Service and the Director of the National Labor Service of Chile, requesting a review of Albemarle Corporation's lithium carbonate production lines. The subsequent developments of this incident still require continuous monitoring.

Recently, there has been a notable increase in market trading activity driven by news, with the focus centered on ore supply. In addition to the Jianxiawo mine, supply side also faces many uncertainties, such as the final outcomes of mining rights issues of other mines in Jiangxi (with a deadline of September 30), the resumption of production in Qinghai's salt lakes, and the impact of short-term production cuts or suspensions in overseas projects. However, in news-driven market conditions, it is essential to be vigilant about the impact of rapid capital inflows and outflows on open interest.

Currently, the fundamental situation remains in a tight balance. As we gradually enter the peak demand season, it is expected that the supply-demand relationship will improve. In the short term, smelter inventories can still support supply, with overall supply remaining relatively adequate, albeit with a slight slowdown in the marginal growth rate of supply. As of August 7, SMM statistics showed a weekly lithium carbonate production of 19,556 mt, an increase of 2,288 mt WoW. Despite ongoing uncertainties regarding supply-side issues and mining rights approvals, short-term production is expected to continue rising. Last week, both spodumene and lepidolite-based lithium production increased, primarily due to an increase in toll processing orders and the resumption of production at some maintenance-affected production lines.

Demand-side performance has been robust and optimistic, with an overall marginal improvement in supply and demand. In August, lithium carbonate demand is projected to reach 102,100 mt. Seasonal characteristics have been relatively muted this year, with downstream feedback indicating generally satisfactory battery cell orders, albeit with some differentiation among enterprises. Material production schedule data has been more positive than market expectations. In August, LFP production is projected to reach 311,400 mt, up 7% MoM, while ternary cathode material production is projected to be 70,800 mt, up 3% MoM. However, there has not yet been a significant driver on the demand side, and it is necessary to continuously monitor marginal changes in orders. Meanwhile, downstream restocking signs have emerged. As of August 7, SMM sample statistics showed a weekly total inventory of 142,418 mt lithium carbonate, including 50,999 mt of in-plant inventory, 48,159 mt of downstream inventory, and 43,260 mt of inventory in other segments. Downstream weekly inventory increased by 2,271 mt, with inventory days also showing a shortening trend.

In the short term, seasonal demand improvements, supply-side events, and market sentiment jointly support lithium carbonate prices, with futures expected to maintain a strong upward trend. However, caution should be exercised regarding potential medium-term fundamentals constraints that may arise after a rapid increase in lithium carbonate prices. From a medium and long-term supply-demand balance perspective, the industry as a whole still tends towards a loose situation. It is expected that after the third quarter of this year, new production capacities will be gradually released from African lithium mines, South American salt lakes, and China's salt lake projects.

Although bullish sentiment in the lithium carbonate futures market has cooled somewhat, relevant favorable news has not yet been fully realized. In the short term, lithium carbonate prices will still be significantly influenced by news-driven factors, and it is expected that the most-traded contract will fluctuate considerably within a strong range, with a reference operating range of 80,000-90,000 yuan/mt.

The author of this Chinese article is GF Futures.

Please note that this news is sourced from https://www.cnmn.com.cn/ShowNews1.aspx?id=464237 and translated by SMM.