Fundamental Dual Support, Lithium Carbonate Price Increase Exceeds Expectations

May 12th, News

According to the commodity market analysis system: The price of lithium carbonate has strengthened recently. As of May 12, the benchmark price for battery-grade lithium carbonate in China was 199,000 CNY per ton, a 32.67% increase from the previous period and a 198% increase year-over-year. Futures prices also strengthened, with the main LC2609 contract for lithium carbonate on the Guangzhou Futures Exchange successfully breaking through the 200,000 CNY per ton mark, setting a new high for recent prices.

Price Rises Rapidly, Mismatch Between Supply and Demand Becomes the Core Driver

Lithium carbonate prices officially began to rise in early April. This increase is not driven by short-term market sentiment, but rather supported by both fundamental supply and demand factors and market expectations. The core logic behind this price strength is the mismatch between the recovery of downstream demand and the constraints on upstream supply.

Supply Side: Currently, the supply of tradable lithium ore is tight, with frequent disruptions in overseas mining. In Yichun, Jiangxi, China, some spodumene mines are in the process of renewing their licenses, which may temporarily halt mining activities. The market is concerned that the tight supply situation at the mining end will affect the lithium salt sector.

Demand Side: Although new-energy vehicle sales in the first quarter of this year fell short of expectations, thanks to the increase in battery pack capacity per vehicle, actual demand for power batteries still achieved year-on-year growth. Coupled with the boost from high oil prices, China’s wholesale sales of new-energy vehicles rebounded significantly in April. Meanwhile, energy storage shipments for the first four months far exceeded market expectations. Together, these factors drove strong production plans among downstream companies in May and June, indicating an overall positive trend on the demand side.

Lithium prices have short-term variables and long-term risks in China.

In the short term: If Zimbabwe’s lithium mines can arrive at the port smoothly before the end of June, and if the procedures for resuming production at Jiangxi’s mica mines proceed smoothly, this could help correct the currently potentially overly optimistic market sentiment and ease the tight supply situation.

In the long term, as the penetration rate of new-energy vehicles continues to rise, the market share of energy storage is steadily increasing, and the global energy-storage market is taking on a distinct pattern: "China takes the lead, the U.S. and Europe follow, and emerging markets fill in the gaps." However, currently, soaring lithium prices—the key raw material for energy storage—could to some extent dampen demand for energy storage, potentially triggering a price collapse. At present, this negative feedback loop has not yet materialized. But if lithium prices remain above 200,000 CNY per ton for an extended period, energy-storage demand will eventually contract. This process, however, may take one to two quarters to fully unfold. Moreover, should lithium prices persist at or above 200,000 CNY per ton, the advantages of sodium-ion batteries will gradually become more apparent, accelerating the industrialization of low-cost sodium-ion batteries and squeezing the market share of lithium-ion batteries.

Looking at the spot market: Currently, the 10-day moving average (red) for battery-grade lithium carbonate is above the 20-day moving average (blue), and the gap between the two averages is widening, indicating that the upward trend is accelerating and there remains upward momentum. However, specific developments will still depend on changes in market supply and demand.