Supply-side disruptions persist, lithium carbonate prices continue to rise

April 21 news

According to the commodity market analysis system: Recently, lithium carbonate has entered an upward trend. As of April 21, the benchmark price for battery-grade lithium carbonate is 170,000 CNY per ton, a 13.33% increase from the previous period and a 143% increase year-over-year. This round of price increases is not driven by a single factor but is the inevitable result of the resonance between supply-side multiple disruptions leading to contraction expectations and the continuous recovery in demand providing positive support. The industry's supply and demand pattern is gradually evolving towards a tighter direction, providing a solid foundation for price increases.

Supply Side: Multiple potential risks are overlapping, continuously reinforcing market expectations of supply contraction.

Zimbabwe: The export ban, which had been in place for nearly two months, has already caused delays in supply. Although several Chinese companies have gradually obtained six-month export quota approvals issued by the country since mid-April, the resumption of exports will not happen overnight. Companies still need to complete a series of export procedures, and the backlog of lithium concentrate cannot be shipped all at once. Market forecasts suggest that large-scale shipments of lithium concentrate will not arrive until after July. Against this backdrop, market concerns about tightening lithium ore supplies in May and June continue to intensify. The practice of stockpiling lithium ore ahead of time has further exacerbated short-term supply tightness, resulting in declining lithium concentrate inventories at ports and lower processing fees for spodumene lithium extraction.

Australia: Recently, a fire broke out at one of Victoria’s two sole refineries in Australia. Although the fire did not directly affect diesel production, amid an already unstable global energy supply chain, market concerns about a potential shortage of Australian diesel continue to escalate. As diesel is a critical energy source for lithium mining and transportation, a shortage could directly impact local lithium mining operations. Although there are currently no clear reports of lithium mining projects adjusting their operations, this expectation of a possible supply contraction has continued to intensify. Going forward, developments in the Strait of Hormuz and the pace at which Australian diesel inventories are replenished will become key variables influencing overseas lithium supply.

China: The structural contraction in lithium ore supply has further amplified the tight supply situation. Yichun, Jiangxi, as the core production area of China's lepidolite mines, has a significant impact on domestic supply with its capacity changes. Currently, several lepidolite mines in the Yichun region have already been shut down, and another four mines are expected to enter the shutdown and license renewal phase in May. In the second half of the year, there may be seven more mines facing shutdowns, and the subsequent restart cycle for these mines could last over a year. This structural contraction is due to increased environmental compliance requirements and cost inversion pressures. With lithium being clearly defined as a strategic independent mineral, local mines need to complete the main mineral license renewal approval process. Additionally, the cost of tailings disposal has risen significantly, increasing the survival pressure on small and medium-sized mines, further tightening China's lithium ore supply, and becoming an important factor supporting the price of lithium carbonate.

Demand Side: Continued Recovery

The "dual-wheel drive" pattern of power batteries and energy storage batteries is becoming increasingly clear, with demand resilience continuing to stand out. In the field of power batteries, although sales of new energy vehicles in China declined year-on-year in the first quarter, the significant increase in the electricity capacity per vehicle drove the production of power battery cells to maintain high-speed growth, with a year-on-year increase in production of nearly 40% in the first quarter, reflecting the inherent resilience of power battery demand. At the same time, the energy storage sector has seen explosive growth, with a year-on-year increase in the production of energy storage battery cells exceeding 90%, and the scale of winning bid capacities increasing by as much as 168% year-on-year. The share of scheduled production for energy storage battery cells continues to rise, becoming an important driver of lithium demand growth. Based on this, institutions are optimistic about the subsequent production schedule of batteries, with both April and May showing a month-on-month growth trend. The continuous upward revision of demand expectations further strengthens the upward momentum of lithium carbonate prices.

Overall, the current upward trend in lithium carbonate prices is the result of a resonance between shrinking supply expectations triggered by multiple disruptions on the supply side and the continued recovery in demand. In the short term, uncertainties on the supply side will persist. The developments at the Jiangxi mines in China, the progress of lithium concentrate exports from Zimbabwe overseas, and Australia's energy supply situation will continue to influence price trends. On the demand side, strong demand is expected to hold steady, with dual drivers—demand for power batteries and energy storage batteries—further bolstering support for the lower end of the price range. However, it’s important to note that the current range of lithium carbonate price fluctuations has narrowed somewhat. Going forward, close attention should be paid to the pace of resumption of production at the Jiangxi mines, the extent to which demand materializes, as well as potential impacts arising from global macroeconomic conditions and shifts in the supply chain. Overall, the tight balance between supply and demand in the lithium carbonate market is likely to persist in the second quarter, and prices will probably remain at high levels.