Demand has climbed to a sustained decline, and there may still be room for a price cut for lithium carbonate

The rapid growth in the number of new energy electric vehicles over the past two years has upset the balance between supply and demand for lithium, leading to a continuous rise in the price of lithium carbonate. However, upstream lithium prices experienced a long-term increase since 2021 and peaked at an all-time high of 590,000 yuan per ton by November 2022.

But since mid-February this year, lithium salt prices have fallen in a row, breaching important thresholds of 500,000 CNY and 400,000 CNY, respectively. As of March 2nd, the average price for battery-grade carbonates had fallen to around ¥382,500/ton while raw materials like nickel, cobalt, manganese etc also saw varying degrees drop.

There are several reasons behind this downward trend:

First, the surge in Lithium pricing in the last few years was too fast-paced, with a degree of virtual hype driving up demand, but has recently cooled off; secondly, government regulations regularly intervened against hoarding behaviors or artificially inflating market values across both ends (upstream & downstream) of Li-ion industry.

As carbonate's value continues its steady descent, current changes within the New Energy Vehicle (NEV) Industry chain become apparent where previously dependent lower stream industries start taking on more independent roles.

Currently, lithium pricing is influenced by both market factors and industrial demand..In terms of supplies, carbon manufacturers have maintained stable production levels. Some slight increases can again be seen as temperatures return to normal..On the demand side, however, the recovery in the end markets remained slower than expected. Some product lines are still operating at low load rates, and that, combined with the constant reductions, makes people hesitant to buy in bulk. Most of the purchases now being made are merely necessary and not speculative purchases.

This reduction has the potential to drive down the costs associated with power cells, a positive development that supports a healthy orderly expansion along the NEV sector. It will simultaneously ease the pressure on businesses operating within the said area.

We can predict that the impact of the cost end on the lithium salt price has diminished and the demand end is the dominant factor. Lithium carbonate prices are expected to have room to fall in the afternoon session.