Lithium carbonate prices projected to fall fractionally in July

The lithium carbonate prices will gain support from the expanding supply deficit in July on the backdrop of improving downstream demand and stalling supply. However, the lithium carbonate prices are still above the acceptable prices of downstream players, especially when the profits remain considerable. More importantly, the upcoming listing of lithium carbonate futures contract also stirs the nerves of market players that the prices might fall.

The prices of lithium carbonate and lithium hydroxide both showed a weekly fall of 1.31% and 2.65% respectively at Yuan 302,500/tonne and Yuan 294,000/t as of last Friday July 14, according to Mysteel.

Figure 1-1. Lithium Carbonate and Hydroxide Price Chart (Yuan/t)

Source: Mysteel

On the demand side, the domestic production of new energy passenger cars recorded 736,000 units in June, up 9.3% month-on-month (MoM) and 30.3% year-on-year (YoY). Among them, the production of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEV) rose 5% and 19.7% MoM respectively at 500,000 units and 235,000 units, spiking 13.1% and 92.6% YoY respectively.

The sales, on the other hand, came in at 665,000 units, indicating a MoM growth of 14.7% and a YoY jump of 25.2%. BEVs and PHEVs reported a sales volume of 449,000 units and 217,000 units respectively, up 15.4% and 13.1% MoM, and 6% and 100.2% YoY respectively.

The sales of new energy passenger cars in July are estimated to stay flat over the level in June, as June sales have overdrawn the potential of July due to the season-end factor and 618 mid-year shopping festival.

Figure 1-2. Installed Capacity of Lithium Batteries (GWh)

Sources: China Industry Technology Innovation Strategic Alliance for Electric Vehicles, Mysteel

In terms of power battery, the production of LFP batteries rose rapidly in June thanks to the flourishing energy storage sector, making it an obvious champion over ternary batteries. The manufacturers of ternary batteries, however, focused on destocking due to poor demand.

In detail, the production of power batteries totaled 60.1 GWh in June, gaining 6.3% MoM and 45.7% YoY. LFP power batteries' production demonstrated a monthly growth of 11.7% and an annual surge of 86.3% at 42.2 GWh. Contrarily, the production of ternary batteries lost 4.9% MoM and 4.2% YoY at 17.7 GWh.

The sales of power batteries in June added 9.9% YoY at 52.2 GWh, with sales of ternary batteries falling 16.8% YoY at 18.4%, and LFP batteries growing 33% YoY at 33.7 GWh.

The energy storage batteries' sales were 8.7 GWh in June, almost all of which were LFP batteries. The sales totaled 31.5 GWh year-to-date, with LFP batteries taking up 99% of the total.

It is expected that the energy storage sector will maintain momentum in July, underpinning the demand for LFP batteries. The ternary battery sector, on the other hand, will keep being challenged by poor demand, and manufacturers will still prioritize destocking.

With regard to cathode materials, the production of ternary cathode materials and LFP went up 10.41% and 18.65% MoM respectively in June and is expected to maintain momentum in July with a planned monthly increase of 4.72% and 19.45% respectively.

Table 1-1. Actual Production and Production Scheduling of Cathode Materials (tonne)

Source: Mysteel

On the supply side, the lithium carbonate production rose 21.6% MoM at 39,400 t in June and is expected to add up to 40,000 t in July, according to the survey of mainstream smelters.

The production in July will likely be restricted by the FISU World University Games to be held in Sichuan Province, a major producing area of lithium carbonate, that will probably lead to staggered power consumption among smelters. In addition, the natural gas pipeline maintenance in Jiangxi Province is estimated to bring down the production by 1,000 t. Nevertheless, rebounding production of lepidolite will offset the production cuts.

Table 1-2. Actual Production and Production Scheduling of Lithium Salts (tonne)

Source: Mysteel

The lithium carbonate sector is expected to see a supply deficit of 2,500 t in July based on the available production scheduling, in addition to the recovering demand since this April, and falling in-house inventory of lithium salt smelters.

Figure 1-3. Supply-Demand Balance Index of Lithium Carbonate (Jan 2020 = 1)

Source: Mysteel

Looking ahead, the lithium carbonate prices will gain support from the expanding supply deficit in July on the backdrop of improving downstream demand and stalling supply. However, the lithium carbonate prices are still above the acceptable prices of downstream players, especially when the profits remain considerable. More importantly, the upcoming listing of lithium carbonate futures contract also stirs the nerves of market players that the prices might fall.

Taken together, lithium carbonate prices are projected to fall slightly to Yuan 290,000-310,000/t through July.

Written by Aggie Hu, huchenying@mysteel.com