Multiple-Factor Resonance Causes Lithium Carbonate to Fall from High Levels

February 9th News

According to the commodity market analysis system: Recently, the price of lithium carbonate has fallen from a high level. As of February 9, the benchmark price of battery-grade lithium carbonate is 136,000 CNY per ton, down 6.21% from the same period last week (February 2), down 2.86% month-over-month, and up 71.7% year-over-year.

Supply Side: Expectations of Looser Imports Continue to Rise

As the Spring Festival approaches, some lithium salt plants in China have scheduled maintenance or holidays, leading to an expected 16.4% month-on-month decrease in total lithium carbonate production in February to 82,000 tons. However, the early resumption of production at Brazil's Sigma lithium mine and a 44.82% month-on-month increase in Chile's lithium salt export volume to 16,950 tons in January have raised concerns about short-term supply pressures. Although such increases in supply are mostly pulse shipments and not a trend, they still further suppress prices in the fragile market sentiment. At the same time, Chinese lithium salt plants have ample raw material inventories and a higher willingness to stock up for the future. Although traders have a strong desire to maintain prices, the market has reached a consensus on the expectation of oversupply, further intensifying downward pressure on prices.

Demand Side: Short-term Seasonal Contraction

During the Spring Festival holiday, the downstream market for lithium carbonate entered its traditional off-season, and demand showed a temporary contraction. Downstream cathode material companies saw their production schedules decline by 10-15% month-on-month, affected by factory shutdowns during the holiday and equipment maintenance. Among them, the operating rate of ternary materials declined significantly. Although lithium iron phosphate benefited from strong demand in the energy storage sector and remained relatively stable, even leading companies experienced a 17% month-on-month drop in February production schedules. Meanwhile, downstream companies had largely completed their pre-holiday inventory preparations, and over the past two weeks, downstream inventory levels have surged sharply. Most companies now have sufficient stock to meet February demand, with some even stocking up ahead of schedule until early March. In the past couple of days, restocking activities have essentially come to an end, and short-term procurement demand has slowed down considerably. Only a small amount of essential restocking remains, making it difficult for such demand to provide effective support for prices. Moreover, the temporary restocking that occurred during periods of sharp price declines—such as the roughly 10,000-ton restocking on February 5, the day the price hit its daily limit down—was mostly driven by downstream companies taking advantage of low prices for short-term buying. This was not indicative of a sustained recovery in demand and could not alter the overall weak demand situation in the short term.

Futures market disruptions intensify, panic sentiment accelerates price declines.

The sharp drop in futures prices has triggered panic in the spot market, completely shattering the resolve of traders to hold prices firm and significantly increasing their willingness to sell. To avoid the risk of further price declines, some traders have chosen to dump their inventories at low prices, further depressing the spot price. Meanwhile, downstream enterprises are taking advantage of the price decline to delay purchases, exacerbating the imbalance between supply and demand in the spot market. Excessive focus on short-term supply increases and weak demand has further reinforced bearish sentiment, causing the speed of price declines to exceed the actual fundamentals, with panic selling becoming a key driver of the downward price trend.

Lithium carbonate data analysts believe: multiple factors are resonating, leading to a decline in lithium carbonate. As the Chinese New Year holiday approaches, downstream demand will continue to be in the off-season. The recovery of market sentiment in the futures market will take time, and lithium carbonate prices still face some downward pressure. However, in the long term, the strong growth certainty of the downstream new energy industry means that the demand for lithium carbonate will steadily increase.