China's lithium carbonate prices are expected to fall in the near term since the demand has not yet fully picked up based on the orders placed, but will probably rally by the end of September considering the low inventory among both upstream and downstream players as well as anticipated demand recovery.
According to Mysteel observation, the prices of battery grade lithium carbonate and lithium hydroxide dropped 2.95% and 3.96% respectively week on week at Yuan 197,500/t and Yuan 194,000/t as of September 8.
Figure 1-1. Lithium Carbonate and Lithium Hydroxide Price Trend
Source: Mysteel
With smelters gradually disclosing their production scheduling for September, it is increasingly clear that the prices of lithium carbonate are primarily subject to the demand side in the month. Should the end-market demand recover by the end of September, the battery factories' stockpiling activities will support lithium carbonate prices to a certain extent.
Mysteel estimates that the sales volume of new energy vehicles (NEVs) should have reached 800,000 units in August, up 9.2% from July, based on the disclosed sales performance of large brands. BYD sold 274,000 vehicles in August, rising 5% month or month. The sales volume of GAC AION and LiAuto stood at 45,000 and 35,00 vehicles respectively, an increase of 0% and 3% MoM respectively.
Generally, China's NEV sector is experiencing a demand recovery course at present, and the demand is believed to substantially rebound by the last week of September promoted by falling deposit interest rates as well as NEV replacement subsidies.
Table 1-1. Sales Volume of Key NEV Brands
Sources: NEV brands' official websites, Mysteel
Regarding the battery installation, the installed capacity of BYD power battery and energy storage battery totaled 13.92 GWh in August, up 12.2% from July. The combined lithium-ion battery installed capacity is estimated at 36.8 GWh in August, including 34.5 GWh of power battery, an increase of 8% from 32 GWh in July.
Table 1-2. Power Battery Installed Capacity
Source: Mysteel, China Automotive Power Battery Industry Innovation Alliance
On the raw material side, the production of LFP cathode materials dropped 8.1% MoM at 150,600 tonnes in August, and is estimated to rise 8.81% on a monthly basis at 163,900 t in September, according to Mysteel survey. Ternary cathode materials' production stood at 55,300 t in August, rising 4.34% from July; and the production is projected at 53,600 t in September, down 3.05% MoM.
The supply of lithium ore has been falling recently. Some traders holding lithium sources at ports stopped making quotations, while some mines with low ore grade in Africa have reduced the production. Nevertheless, the lithium salt smelters have had no intentions of holding the prices firm when the demand has been soft recently.
Specially, some smelters intend to produce battery grade lithium carbonate using battery grade lithium hydroxide in light of expanding price spread between the two owing to differentiated downstream market dynamics.
In summary, lithium carbonate prices are expected to fall further in the near term on relatively poor demand. But the low lithium carbonate inventory held by both lithium salt smelters and battery factories will shore up lithium carbonate prices should the end-market demand revive as expected by the end of September.
It is worth mentioning that the high finished battery inventory of battery factories is a potential bear for lithium carbonate prices.
Mysteel projects that lithium carbonate prices will move between Yuan 180,000-210,000/t through September.
Written by Aggie Hu, huchenying@mysteel.com