Lithium Carbonate Futures Contract Soars And Hits Daily Upside Limit After Persistent Downturn. What Are The Drivers Behind The Rally?

SHANGHAI, Oct 12 (SMM) – After hitting a historic low of 145,000 yuan/mt on September 27, lithium carbonate futures contract has rebounded for several consecutive trading days. Prices jumped 6.97% to hit a daily upside limit today.

SMM attributes the price gains to following factors:

1. Massive capital has poured into lithium carbonate futures market recently. As of today, the weighed total open interest has soared to 119,200 lots, a record high since futures contract was launched.

2. Rally of futures contract prices is justified as the futures-spot price gap widened drastically due to the former falling more sharply than the latter. The gap was as big as 24,000 yuan/mt on September 27.

3. There are currently tremendous amount of warehouse receipts of lithium carbonate futures contract, but deliverable goods are scarce, forcing bears to close their positions.

Driven by rising futures price, spot price also climbed, gaining 500 yuan/mt to an average of 169,500 yuan/mt today.

With most smelters now struggling to break even, some have cut production or refrained from selling at lower price. Some are only willing to deliver long-term contracts, with no interest in selling in the spot market.

However, downstream demand remains weak. Given the deadlock between sellers and buyers, short-term lithium carbonate price may move rangebound, but further rally is also likely.