SHANGHAI, Dec 20 (SMM) - The prices of lithium carbonate have been falling constantly recently, and are unlikely to remain high amid weakening domestic demand and gloomy expectations. It is reported that a second-tier LFP material factory sold several hundred metric tonnes of industrial grade lithium carbonate to mitigate its excessively high inventory pressure, and some ternary cathode material factories also intended to sell their battery grade lithium carbonate stocks.
On the supply side, Chinese lithium carbonate output is likely to fall 7% MoM in December for a series of impacts including seasonal production curtailment of salt lake projects in winter, the environmental protection incident in Jiangxi in early December, as well as the advanced maintenance plans of some manufacturers.
On the demand side, the orders of cathode active materials (CAMs) have dropped palpably amid contracting demand in the power battery market and gloomy expectations concerning the demand performance in the first quarter next year. Some CAM factories even reported a 50-60% fall in their orders received. Based on conservative estimates, the output of ternary cathode materials will fall 11% MoM in December, and that of LFP will drop 9%. The material factories now give priority to consuming their in-plant lithium salt stocks, and become more cautious in purchasing raw materials. When it is transmitted to the upstream lithium salt end, there only exist some purchases in the spot market in a small amount.
In terms of price performance, large lithium salt factories mainly trade in the form of long-term orders, and the settlement price based on the average price of SMM battery-grade lithium carbonate in the previous month. Since most lithium salt factories have basically completed the delivery of long-term orders in 2022, they are not in a hurry to make shipments. And they also insist on high prices amid booming cost. However, some large lithium salt factories have slightly lowered their prices, and sold some spot cargoes in a small amount. The traders, on the other hand, are active in selling off, including industrial grade and quasi battery grade lithium carbonate, which has weighed on the market prices as a whole. CAM factories are less willing to purchase at present, and most of them restock modestly. And the spot market has seen no large-scale transactions recently.
According to SMM understanding, many lithium salt factories are negotiating with downstream companies regarding long-term contracts in 2023. As the sales performance of batteries and cars has fallen short, the prices of lithium salt continue to weaken, putting CAM factories on the sidelines. Therefore, the long-term orders are subject to divergent rules for settlement. Some insist to use SMM battery grade lithium carbonate price index, while some prefer the average price of high and low-end price range. As of December 16, the SMM battery grade lithium carbonate price index was 557,500 yuan/mt, which was 800 yuan/mt lower than the previous trading day. Meanwhile, the average price of SMM high and low-end price range was 555,000 yuan/mt, which was 1,500 yuan/mt lower than a day ago. Many companies said that the price index is more sensitive and can better mirror the overall dynamics of the market, and intends to promote the price index as the settlement reference. However, there are also differences as which SMM price index to use for final settlement, the index for the front month, the previous month or the next month. SMM will continue to track relevant data and market dynamics.
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