After falling from its recent peak of above Yuan 200,000/tonne, the lithium carbonate futures price on Guangzhou Futures Exchange (GFEX) finally staged a rebound in early June, which, however, has been capped by the historically high GFEX warrants, although they have eased modestly from their recent peak of above 53,000 lots.
Source: Mysteel
On the raw material front, lithium ore prices moved higher last week in line with the modest recovery in lithium carbonate, but lithium converters grew more cautious in their price-fixing strategies. Those that already settled large volumes of back-pricing contracts during the previous downtrend have since stepped back. Large lithium converters relying on outsourced feedstock have also locked in supply for the third quarter. Therefore, attention now turns to whether these shipments will materialize as expected.
Lithium ore inventories have continued to decline. As of June 12, traders' lithium ore stocks stood at 107,000 tonnes, down 7,000 tonnes week-on-week, based on Mysteel's data. Lithium converters have remained active in inquiring, while spot availability continues to tighten. Miners are showing a stronger willingness to squeeze processing fees. Current processing fees for Australia's spodumene have fallen to Yuan 17,500/tonne, and for Africa's spodumene to Yuan 18,000/tonne, both down from the previous week.
On the lithium carbonate side, spot transaction volumes edged lower last week. Downstream cathode and battery cell producers maintained a cautious procurement approach, buying only essential volumes at low prices. This is partly because the cathode producers received substantial feedstock under tolling arrangements in the first half of the month and were in no rush to purchase, only considering small spot purchases when prices fell below the monthly average.
GFEX warrants have eased from their peak but remain elevated. The pace and scale of the drawdown have been slower than expected. The market has yet to price in the "industrial reprocessing" mechanism (refining lithium carbonate from warrants) that could absorb high warrants. For now, the downstream buyers gradually take delivery and select better-quality warrants.
In other words, the lithium carbonate supply remains relatively ample in the near term, and there is no strong catalyst for a sustained price uptrend.
Yet, the demand-end has maintained resilience. Strong energy storage demand and feedstock restocking tied to the ramp-up of BYD's second-generation blade battery production lines are supporting cathode production schedules. Market expectations for July and August battery production are optimistic, with projected month-on-month growth of 5-10% in July and around 5% in August, showing a sustained upward trend.
In summary, high warrants remain the key factor capping lithium carbonate price rebounds. However, tightening ore supply and steady demand growth together continue to provide a cost floor.
In the near term, the lithium carbonate prices are expected to trade within a range of Yuan 155,000-175,000/tonne. A clear directional trend will require stronger signals. Going forward, attention should focus on the ore shipments, the pace of warrants drawdowns, and the actual strength of peak-season demand.
Written by Aggie Hu, huchenying@mysteel.com
