Lithium carbonate prices are expected to still have room to fall, with the supply-demand balance point expected to occur by the end of 2024 or 2025, an expert said.
As a key raw material for power batteries, lithium carbonate prices in China are falling non-stop, as the supply-demand balance point is still far from coming.
The main lithium carbonate futures contract traded in Guangzhou and due for settlement in January 2024 fell 6.86 percent to RMB 116,800 ($16,330) a ton by the close of Monday's morning trading. The futures contract has a 7 percent one-day limit on gains and losses.
Since its launch on July 21, the price of lithium carbonate futures has fallen about 53 percent from its first-day listing price of RMB 246,000 per ton.
In the spot market, lithium carbonate prices have barely seen a single day's increase since the end of May.
On November 24, battery-grade lithium carbonate was quoted in China at RMB 140,000 per ton, while industrial-grade lithium carbonate was quoted at RMB 133,000 per ton, down 54 percent and 53 percent, respectively, from the prices quoted on May 31, according to Mysteel.
Lithium carbonate prices are still expected to have room to fall, with the supply-demand equilibrium point expected to occur by the end of 2024 or 2025, said Zhang Jiafeng, a professor at the School of Metallurgy and Environment at Central South University, as quoted by the Securities Times in a report today.
Demand for lithium carbonate remains weak, while supply continues to be released, according to Zhang.
It has become an industry consensus that lithium carbonate is in a state of oversupply, which is attributed to the fact that the expansion of production in 2021 and 2022 were too fast and there were too many players entering the field from other industries, resulting in the supply exceeding the demand, the report said, citing an unnamed analyst in the energy and metals industry.
As the price of lithium carbonate goes down, some players who joined the sector when prices were high are being gradually pushed out, but the current trend for this is not strong enough, the analyst said.
Only when the price of lithium carbonate falls to much lower levels and some companies suffer losses and exit voluntarily will the industry come close to a supply-demand balance, the analyst said.
The price of lithium carbonate could fall below RMB 100,000 per ton, the analyst said, according to the report.
The Securities Times report also noted that China's new energy vehicle (NEV) sales remain strong, which may be able to provide some support to raw material prices.
NEV production and sales figures exceeded expectations, which had a boosting effect on the entire industry chain, the analyst said.
The continued decline in lithium carbonate prices will help NEV makers see a drop in battery costs, thus boosting gross margins.
Every RMB 50,000 drop in lithium carbonate prices brings roughly a 1.5 percent improvement in gross margins for Nio (NYSE: NIO), William Li, the company's founder, chairman, and CEO, said in September in response to a question from CnEVPost.
In addition, the plunge in lithium carbonate prices could potentially hamper the development of sodium-ion batteries, whose lower cost is the biggest advantage.
($1 = RMB 7.1537)