Short-term correction in lithium carbonate, medium to long-term logic remains unchanged

May 18th News

According to the commodity market analysis system: Recently, after reaching the key level of 200,000 CNY per ton, lithium carbonate has seen a pullback. As of May 18th, the benchmark price for battery-grade lithium carbonate is 190,000 CNY per ton, up 13.1% month-over-month and up 198.12% year-over-year.

The concentrated fermentation of negative news has broken the previous bullish expectations.

1. The adjustment of inventory statistical criteria has sparked bearish sentiment in the market. An institution announced that it will expand the scope of inventory statistics for traders starting from May 21. This move is interpreted by the market as "hidden inventories becoming visible," directly undermining the core bullish logic of "extremely low industry inventory" previously. Some funds, considering risk avoidance, have exited the market early, becoming the primary factor triggering the correction.

2. The sharp increase in futures warehouse receipts intensified panic sentiment. On May 15, the number of lithium carbonate futures warehouse receipts at the Guangzhou Futures Exchange increased by 1,329 contracts compared to the previous period, equivalent to about 14,000 tons of physical goods. This amplified the panic in the high market and pushed the futures prices to decline rapidly.

3. Rumors of easing overseas supply are unsettling market expectations. The market is abuzz with news that Chile’s SQM has raised its full-year lithium product shipment targets. Coupled with rumors that Zimbabwe’s lithium mines are set to resume shipments (with actual arrival expected in July), these developments have, in the short term, heightened concerns about an increase in supply, further weighing on price trends.

4. Goldman Sachs' bearish report further amplifies market divergence. In its latest research report, Goldman Sachs reiterates that it expects the price of lithium carbonate to fall to 65,000 CNY per ton by the end of the year, predicting a supply surplus in the global lithium market in the second half of the year. This view stands in stark contrast to the optimistic expectations of institutions such as Morgan Stanley and UBS, intensifying market divergence.

5. Concerns about negative demand feedback have triggered a risk-averse sentiment among investors. As lithium prices have surpassed 200,000 CNY per ton, some investors are worried that the increased costs for downstream power battery and cathode material companies in China may lead to a slowdown in production, thereby suppressing lithium demand and further intensifying the pressure for price corrections.

The core logic remains unchanged, and demand still shows resilience.

The sustained resilience on the demand side is the core support for the medium- to long-term bullish outlook on lithium carbonate. Although prices have experienced a short-term pullback, the demand structure driven simultaneously by energy storage and power batteries remains unchanged. Moreover, the peak-season inventory-replenishment cycle is about to begin, further bolstering industry optimism. As energy-storage projects come online in concentrated fashion during May and June, demand for energy storage will continue to surge, indirectly boosting demand for lithium carbonate. The traditional peak-season inventory-replenishment cycle for power batteries has officially kicked off, and downstream companies’ restocking activities will further fuel demand for lithium carbonate, alleviating downward pressure from the short-term price correction. Meanwhile, favorable developments in overseas markets—such as the U.S. lifting its countervailing duties and anti-dumping and anti-subsidy tariffs on negative-electrode materials—are driving growth in exports within the lithium-ion battery supply chain, thereby indirectly boosting demand for power batteries.

Combining the information from SpotCom, the current short-term 10-day moving average (red) is still above the long-term 20-day moving average (blue), indicating that lithium carbonate still has an upward trend. Short-term news disturbances have not changed the core logic of the fundamental upward trend. It is expected that lithium carbonate may rise with fluctuations, but specific attention still needs to be paid to changes in market supply and demand.