According to the monitoring of the commodity market analysis system of Business Society, the price of lithium carbonate in 2023 can be said to have plummeted. As of December 31, 2023, the average domestic mixed price of industrial grade lithium carbonate was 94000 yuan/ton, a decrease of 81.35% compared to the average price of 504000 yuan/ton on January 1. On December 31st, the average domestic mixed price of battery grade lithium carbonate was 103000 yuan/ton, a decrease of 80.38% compared to the average price of 525000 yuan/ton on January 1st.
Looking back at the price of lithium carbonate in 2023, except for the brief rebound in downstream demand replenishment at the end of April and the production reduction and price increase in lithium salt factories at the end of September, the price of lithium carbonate has maintained a continuous downward trend throughout the year. The price trend of lithium carbonate in 2023 can be interpreted through three stages:
Phase 1 (January April): Lithium carbonate prices plummeted rapidly, with industrial grade lithium carbonate falling by 65.48% and battery grade lithium carbonate falling by 61.9%.
Due to the rush to install new energy at the end of 2022, downstream orders in the first quarter of 2023 have weakened. At the beginning of the year, the national subsidy for new energy vehicles declined; The “Lithium Mine Rebate” plan launched by CATL in February; Subsequently, factors such as price reductions and promotions for gasoline vehicles led to a slowdown in the growth rate of downstream demand for new energy vehicles, triggering pessimistic expectations in the industry chain and subsequently driving the rapid decline in lithium carbonate prices. Therefore, from February to April, the entire lithium battery industry chain showed a state of destocking, and the production of lithium carbonate did not decrease. However, downstream purchasing demand continued to weaken, and lithium salt factories had high inventory, highlighting shipping pressure and a significant drop in prices.
Phase 2 (May July): Lithium carbonate prices experienced a brief rebound, with industrial grade lithium carbonate increasing by 59.77% and battery grade lithium carbonate increasing by 49%.
Since late April, lithium carbonate prices have gradually shown signs of correction, and the price increase in May has continued to expand. The increase in prices this time is mostly due to the boost in market demand, which has led to an improvement in downstream production. Positive electrode material factories are gradually starting to replenish their inventory, and the market supply and demand relationship is gradually balanced. With the completion of downstream replenishment, market procurement gradually returns to rationality, and prices begin to stabilize and fall while demand remains high. In addition, on July 21, 2023, lithium carbonate futures contracts were listed for trading on the Guangzhou Futures Exchange. On the first day of trading, all lithium carbonate contracts showed a significant decline, which later drove the spot price of lithium carbonate into a downward channel again.
The third stage (August December): Lithium carbonate prices have been declining, with industrial grade lithium carbonate falling by 65.69% and battery grade lithium carbonate falling by 64.97%.
The spot price of lithium carbonate in August was guided by the weakness of the futures market, and the downward speed further accelerated and continuously approached the cost line. Under the influence of pessimistic market expectations, downstream enterprises actively reduce inventory and delay procurement as much as possible. After some lithium salt factories reduced production at the end of September, prices rebounded in stages, and then bottomed out under multiple bearish factors such as weak demand and high inventory due to a shift in lithium mining pricing model. However, the sales growth of new energy vehicles during the traditional peak season of “Golden September and Silver October” this year is not significant, and the overall production schedule in the middle of the industry chain has been reduced. The purchasing attitude towards raw material lithium salts has weakened, leading to a continuous decline in lithium carbonate prices. At the same time, the increment of overseas resources has gradually arrived at the port, increasing the supply of lithium carbonate market and continuously seeking low-cost support for prices.
Oversupply of lithium carbonate in 2024 is likely to continue
In 2023, the lithium industry is in a surplus state from upstream minerals to midstream materials and downstream batteries, and the long-term production surplus on the supply side is relatively clear. In 2024, new projects in Australia, South America, Africa, and China will gradually start production and contribute significantly to the growth.
In terms of upstream minerals: In 2023, there will be a significant increase in upstream lithium resource supply, and overseas lithium resource supply will continue to increase. Australian lithium mines and South American salt lakes will still be the main force in terms of total supply and increase. According to data from China Customs, the import volume of lithium ore in China from January to October 2023 was 3.621 million tons, an increase of 65.9% year-on-year; Among them, 2.976 million tons were imported from Australia, an increase of 48.7% year-on-year. China’s external dependence on lithium mines is over 50%, and Australia remains the largest source of lithium ore imports for China. In 2024, Australia’s lithium concentrate production capacity increased by 850000 tons, and it is expected that Australia’s lithium resource supply will reach 462000 tons (lithium carbonate equivalent LCE) by 2024, a year-on-year increase of 22%.
The price of lithium concentrate has dropped significantly in 2023, and as of December 2023, the price of spodumene concentrate has dropped to $1060 per ton. The decline in ore prices in the early stage was relatively small and lagging behind that of lithium carbonate. After the change in pricing methods, the price of imported lithium concentrate accelerated its decline. After the fourth quarter ore price negotiations in Australia, some mining companies adopted the M+1 pricing method, which to some extent weakened the voice of lithium mines and weakened the support of ore prices for lithium carbonate prices.
Compared with foreign countries, the progress of domestic lithium resource projects is relatively slow. Jiangxi is facing environmental pressure, while Qinghai and Xizang are facing multiple pressures such as poor natural environment and backward infrastructure. The main increase in domestic lithium mines in 2024 comes from the production and upgrading of porcelain clay mines in Jianxiawo mining area, Lijiagou mining area, and Shuinan mining area of Jieshili mining area in Fengxin County. The new production capacity of the salt lake mainly comes from the expansion of Chaerhan Salt Lake, West Taijinar Salt Lake, Zhabuye Salt Lake, and Jiezechaka Salt Lake. Among them, Chaerhan Salt Lake plans to expand by 40000 tons of LCE, with the largest new production capacity.
In terms of production capacity: In recent years, under the boost of new energy policies, the domestic production of lithium carbonate has steadily increased, from 78000 tons per year in 2016 to 395000 tons in 2022, with a compound annual growth rate of 28%. From January to December 2023, China’s total production of lithium carbonate was approximately 460000 tons, a year-on-year increase of 31.4%. In 2023, the supply of lithium carbonate has grown rapidly, but due to the continuous decline in prices and average profit levels, the operating rate of lithium carbonate is basically around 50%, and the operating rate of lithium salt plants has always been low. However, some of the new production capacity has been put into operation as scheduled, and new projects will be released gradually in the next two years. It is expected that the production in 2024 may reach 590000 tons, a year-on-year increase of 30%.
In terms of import and export: According to data from China Customs, the cumulative import of lithium carbonate in China from January to November 2023 was 138413.1 tons, a year-on-year increase of 10.54%. With sufficient supply of lithium carbonate in China, the continuous increase in imported lithium carbonate puts certain pressure on the domestic market.
The export volume of lithium carbonate from China from January to November 2023 was 9286 tons, a year-on-year decrease of 2.6%. In recent years, the production of lithium carbonate overseas has steadily increased. In addition, the international electric vehicle market is mostly for high nickel models, and the main raw material demand for this technology route is lithium hydroxide. Therefore, the demand for lithium carbonate in China from overseas is relatively limited.
There is certain pressure on the demand for lithium carbonate in 2024
In 2023, the consumption of lithium carbonate increased by approximately 24.6% compared to last year, with the increment mainly contributed by the new energy vehicle and energy storage industries. The 3C industry is still adjusting, while traditional demand maintains a small single digit growth.
Power battery field: From January to November 2023, China’s power battery production was 628.7GWh, a year-on-year increase of 28.5%. The installed capacity of power batteries in China from January to November 2023 was 339.7GWh, a year-on-year increase of 31.4%. Although the growth rate of installed capacity is higher than that of battery production, the absolute growth rate of production is still higher than that of installed capacity, which is also the reason why battery inventory has been accumulating. At present, the vast majority of battery inventory is lithium iron phosphate batteries. Based on the current monthly installed capacity consumption rate, lithium iron phosphate batteries need to be consumed for 5 months, and ternary batteries need to be consumed for 1 month.
In the field of energy storage batteries, the growth rate of the energy storage market will slow down in 2023 due to domestic and foreign policies, inventory management, raw material prices, overcapacity, and other factors. The production of energy storage batteries in China from January to November 2023 was 147.22 GWh. The estimated global shipment volume of lithium energy storage batteries is 220GWh, a year-on-year increase of 38.1%, but the growth rate has declined significantly, and the shipment volume is lower than expected. The inventory pressure and high overseas interest rates in 2024 will continue to put pressure on the energy storage market. It is expected that the global shipment volume of lithium energy storage batteries will be close to 290GWh in 2024. Compared with the previous two years, the growth rate of energy storage batteries will continue to slow down, and the demand for lithium carbonate will also significantly slow down. It is difficult to believe that lithium carbonate consumption will have a significant positive effect.
In terms of new energy vehicles: In 2023, the production and sales of new energy vehicles in China have maintained high-speed growth. From January to December 2023, the production and sales of new energy vehicles in China reached 9.587 million and 9.495 million, respectively, with a year-on-year increase of 35.8% and 37.9%, and a market share of 31.6%; From January to November, the export of new energy vehicles reached 1.042 million units, a year-on-year increase of 75.7%. With the penetration rate of new energy vehicles in the Chinese market exceeding 30%, the growth rate of demand in the Chinese market may slow down in the future. As a raw material, lithium carbonate is in a downward cycle, and the bottom inventory of each link in the industrial chain may become the norm. The growth rate of demand for lithium carbonate will also slow down accordingly.
The game in the lithium carbonate futures market is intense
On July 21, 2023, when lithium carbonate futures were listed on the Guangzhou Futures Exchange, the listing price of the LC2401 contract was 246000 yuan/ton. Since its listing, the main futures price of lithium carbonate has shown a unilateral decline and has continuously fallen to new historical lows. As the price fell below 100000 yuan, the futures market staged a fierce long short game, with alternating limit up and limit down trends in lithium carbonate futures prices on the market. Near the delivery month, there were several significant fluctuations, almost on par with spot prices. The current lithium carbonate futures price is basically a barometer of the spot market, and the price of lithium carbonate futures will not be reflected in the spot price until the trading day. So, from the price of lithium carbonate futures, we can roughly see the price level of lithium carbonate spot in the coming months.
Looking ahead to 2024, the issue of oversupply remains the main focus of the market. In the context of oversupply, prices may further approach costs, which will provide some support for the price of lithium carbonate. Some small and medium-sized lithium salt factories may shift to contract manufacturing, and the profit distribution on the mining and smelting ends will also become more reasonable, but the pressure on the supply side is still relatively high. In terms of demand, the new energy vehicle industry is gradually entering a mature stage, and the driving force of demand for lithium carbonate is gradually diminishing. Given this year’s high base, it will be quite difficult to achieve the same growth rate next year. The competition in the new energy vehicle industry is becoming increasingly fierce, and car companies have a strong drive to lower costs and prices. The increase in participation in the futures market and the linkage between futures and spot prices will gradually guide the lithium industry chain to return to rationality, which is expected to form a unified price system for China’s lithium carbonate industry. The fluctuation of lithium carbonate prices in 2024 will be smaller than in 2023, and the key factors affecting lithium carbonate prices are mining disturbances, supply side production reductions, and downstream demand. It is expected that if prices continue to decline in the short term, some lithium salt factories will suffer losses, and lithium carbonate prices may rebound from the low point, but the rebound is limited.
