SMM Analysis: Lithium Carbonate May Fluctuate While Moving Rangebound

SHANGHAI, Mar 30(SMM) - Recently, the price movement of lithium carbonate has gradually stabilised, while the spot prices of battery-grade lithium carbonate moved rangebound for nearly half a month. Although the prices moved rangebound, there were still many uncertainties.

On the supply side, most lithium salt plants operated with full capacity in March after the end of maintenance. The growth rates of lithium salt smelting are expected to increase by 28% coupled with the the slight increase in the output of Qinghai Salt Lake after the start of spring. However, based on the current information, the tight supply of ore will not have been resolved in April. The increase in lithium carbonate supply will be offered by salt lake and imports. The growth rate may slow down to about 6%.

On the demand side, it is detailed by material type and industry segment as follow:

LFP: Q2 orders have not yet seen a significant decline. On the one hand, after Q1 2022 off-season, the actual installed capacity of battery factories in January and February formed a large difference between the battery production, which was more obvious with LFP materials. Under the high inventory of battery factory, the demand for LFP dropped sharply. On the other hand, due to the high prices of raw materials, the shutdown of some terminal car models made an impact on the demand for LFP. While the terminal prices adjusted, some battery factories were more worried about the Q2 orders. Under the impact of the two reasons, some battery factories continued to reduce LFP inventory and remained wait-and-see, while the declining demand dragged down the lithium carbonate prices.

NCM cathode material: Q2 orders have not yet seen a significant decline. The soaring nickel prices had a strong impact on the April orders of ternary materials companies that settled with the monthly average price of metal salts last month. In the current situation, small motive power and digital sector did not transmit well with weak demand. In terms of motive power, the total quarterly orders of the leading manufacturers have not yet lowered, and only some battery companies made monthly order adjustments to avoid high nickel prices. As the end of the month approaches and the impact of soaring nickel prices has not subsided, there is still uncertainties towards the ternary order adjustments. In addition, the overall prices of the industry were high, and the cathode material producers in a small and non-mainstream supply chain were facing severe challenges in the industry.

LCO/LMO: Terminal demand for small motive power and digital was in off-season. The overall downstream transmission was difficult coupled with high raw material prices, and the demand of the battery factory for materials declined sharply.

Battery: At present, car companies did not made any quarterly orders for batteries, but the overall wait-and-see mood of car companies was also increasing.

In summary, the supply side of lithium salts has increased significantly since March and it will still be on a slight upward trend in April from March. On the demand side, there was no significant increase in the total output of downstream cathode materials in April, and the overall output was flat or slightly rose. The supply and demand gap may gradually narrow and approach tight balance in April. At the same time, the wait-and-see sentiment in all parts of the industry chain was increasing, and the game continued.

In terms of the market, the tight supply of market spot had been eased under the supply-demand gap. In terms of the downstream material plants, many companies only accepted back-to-back orders. According to orders in April, the urgency of lithium salt purchases had dropped significantly and the stocking timing for April production has also been delayed. On the other hand, the supply of lithium salt increased, which eased the urgent sentiment of the restocking of the cathode material. At the same time, the game was tilted. In terms of upstream lithium salt factory, when the advantages was in the seller's market in the long term, and transmitted to a tight supply-demand balance, the overall industry stood firm to the prices. But in the market game, some traders and small factories brought disturbances to the game which may become the fuse for the delicate balance break, leading to the increase of lithium salt prices. It is expected that lithium carbonate prices may change in the downstream restocking considering the probability of pullback of prices.