Commodities

Spiralling China Lithium Prices Hit 26-Month Low on Supply Glut

 

Lithium prices in China fell sharply last week to hit their lowest point in over two years, after a trial delivery of the critical battery metal to the Guangzhou Futures Exchange indicated larger-than-expected supply.

The most-traded January lithium futures contract on the exchange edged up 1% on Friday to end the week at 124,050 yuan ($17,202.65) per metric ton, down 10% on the week. They shed 7% the week before.

Spot lithium prices in the world’s top producer of the battery metal were effectively down close to 80% year-on-year.

 

Also read: Ford Scales Back Under-Fire CATL Tech-Backed US Battery Plant

 

The metal’s January futures contract posted a 7% tumble on Thursday last week and now stands at less than half its price when it began trading in July.

That fall came a day after a test-run by the exchange for the new contract showed higher-than-expected availability of deliverable supply, analysts and traders said.

“The trial disappointed those who had bet on a shortage of deliverable goods when the contract matured, accelerating the price fall,” said Zhang Weixin, a lithium analyst at China Futures.

The plunge in the futures market dragged down spot lithium prices. Spot lithium carbonate assessed by Fastmarkets MB-LI-0036 fell 11% last week to a 26-month low at 129,000 yuan per ton, its biggest weekly drop in seven months. Prices fell 4% the week before.

Prices could fall to 100,000 yuan per ton by year-end with no expectation for a pick-up in demand, Zhang said.

US Investment bank Goldman Sachs also warned last week that prices of the EV battery metal were unlikely to rebound anytime soon, according to Investing.

Goldman analysts said they expected an excess of 29,000 tonnes LCE (lithium carbonate equivalent) in 2023, with projections indicating that could swell to 202,000 tonnes by 2024.

 

China lithium carbonate 99.5% spot price chart as of November 24, 2023. Image: Investing

 

Oversupply fuelling dramatic fall

China’s lithium prices have tumbled dramatically from a peak close to 600,000 yuan last November, after Beijing ended its national subsidies for electric vehicles (EV).

A resulting slowdown in demand for EV batteries has weighed on lithium prices for much of this year.

Analysts have said that battery manufacturers are not showing any signs that they will hike their orders, especially as lithium prices look set to fall further.

The market has also been weighed down by rising domestic production of lithium carbonate amid lower raw material costs.

Prices of spodumenme MB-LI-0012, one of the main raw materials for the lithium chemical, fell to $1,590 per ton this week, down 80% this year and the lowest since August 2021.

China’s November output of lithium carbonate is expected to climb to 43,970 tons, up 9% from October and up 20% from last November, according to information provider Shanghai Metals Market (SMM).

Inventories readily available in the market stood at 63,296 tons in mid-November, according to SMM, up from 45,917 tons in October.

Increasing overcapacity in China’s energy storage sector this year has eroded margins, sapping appetite by producers to procure the metal at higher prices.

As supply growth outpaces demand, global lithium will register a 4% oversupply this year, said CITIC Futures, versus a deficit of 6% in 2021 and 2022.

 

  • Reuters, with additional inputs from Vishakha Saxena

 

Also read:

LFP Becoming the Battery of Choice for Electric Vehicles

China’s EV Battery Giant CATL Profit Eases on Slower Demand

Lithium Producers Upbeat Despite EV Switch Slowdown

China’s CATL Unveils Game-Changing Fast-Charging LFP Battery

China to Scrutinise Rare Earth Outflows as Exports Rise

World’s Biggest Lithium Hub Being Built in Xinjiang – Yicai

China Scientists Claim Long-Life Battery Breakthrough – STD

China Leading the Way With Rechargeable Sodium Batteries – NYT

 

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at vishakha.saxena@asiafinancial.com

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