Do you remember in January 2023, the average price of lithium carbonate was as high as 500000 yuan/ton? By December 2023, the price of lithium carbonate had dropped by 80%, with an average price of 100000 yuan/ton. Even as we enter 2024, the Chinese New Year off-season and destocking sentiment remain, and prices have not improved. At that time, there were voices saying that the price of lithium carbonate will continue to decline in 2024, and it is not impossible for it to reach a bottom of 50000 yuan.

But at the end of February, the price of lithium carbonate seemed to have reversed, and lithium carbonate futures "changed the normal" and rose for 8 consecutive days. According to the observation of Starting Point Lithium Battery, this round of upward trend started on February 21st. As of the afternoon closing on March 1st, lithium carbonate futures closed at 119450 yuan/ton, approaching the 120000 yuan level, which is about 29% higher than the closing price on February 20th.

However, it should be noted that the upward trend of lithium carbonate futures has ended in the new week. On March 4th, lithium carbonate futures quickly rose at the opening, with the main LC2407 contract reaching a maximum of 125000 yuan/ton, then turning lower and plummeting significantly to 118000 yuan/ton. The lowest intraday drop was 115600 yuan/ton, and the final closing was 117600 yuan/ton.

On the same day, in terms of spot goods, the average price of battery grade lithium carbonate was 105500 yuan/ton, unchanged from the previous day and up 8.8% from a week ago.

The latest data shows that on March 5th, the main LC2407 contract price of lithium carbonate futures continued to decline, closing at 111550 yuan/ton. How long will this round of decline last? When can we resume the rise? What is the price equilibrium point of lithium carbonate? This series of issues has once again become the focus of industry attention.

Behind the "8 consecutive rises"

There must be a reason for everything, and behind the 8-month consecutive rise, it is inseparable from the influence of market news and subjective corporate sentiment. Starting point Lithium believes that the main reasons for this round of price increase may be in the following aspects:

Firstly, the disturbance of environmental inspection news in Jiangxi may affect the production of lithium carbonate. During this period of price increase, there are market rumors that environmental problems in Yichun, Jiangxi have reappeared, which will limit the operation of enterprises that cannot properly handle lithium slag. Meanwhile, it is planned to conduct environmental inspections on the lithium carbonate industry in Yichun in the future.

Although this news has been confirmed by multiple parties as false, the bullish sentiment in the market continues to rise. According to relevant media reports, the central environmental inspection team has indeed entered Jiangxi and conducted environmental inspections in Jiujiang, Nanchang, Yichun and other places. The direction of this environmental inspection is not limited to lithium batteries, but comprehensive environmental inspections. Relevant personnel pointed out that scientific processing and environmentally friendly utilization of lithium slag is indeed one of the urgent problems that the lithium carbonate industry needs to solve. It is currently unclear whether this inspection will affect related projects and production capacity.

Secondly, some lithium mines in Australia have lowered their production guidelines, and the news of production cuts has been transmitted to the market, causing concern. According to the news, several Australian lithium mines such as Finniss, Mt Cattlin, Wodgina, and Greenbushes have successively reduced production. Among them, Mt Cattlin lithium mine has lowered its 2024 lithium concentrate sales guide to 130000 tons, a decrease of 37% from 2023, and Greenbushes lithium mine has lowered its 2024 production guide to 1.3-14 million tons.

The industry points out that if lithium carbonate prices continue to remain low and mining cost pressures persist, it may lead to more other lithium mines suspending mining activities.

Thirdly, the automotive terminal market is improving, and power battery companies are resuming production ahead of schedule, indicating a rebound in demand for lithium carbonate. Data shows that in January 2024, the sales of new energy vehicles in China reached 729000 units, a year-on-year increase of 78.8%, breaking the previous impression of the off-season and boosting market demand. According to market reports, with a focus on the terminal market, midstream battery and supporting enterprises are resuming production ahead of schedule, and the production rate is increasing month by month.

Fourthly, the government has continuously promoted the implementation of the "trade in" policy, boosting the demand for new energy vehicles. For example, on March 1st, the State Council approved the Action Plan for Promoting Large scale Equipment Renewal and Consumer Goods Exchange, which pointed out that a new round of large-scale equipment renewal and consumer goods exchange will be promoted. On March 2nd, Shanghai released a new round of subsidies for the exchange of old for new fuel vehicles and a new energy vehicle replacement policy, providing subsidies of 2800 yuan and 10000 yuan respectively for the purchase of fuel vehicles and new energy vehicles.

The industry believes that as the central and local governments will gradually introduce more such policies, it will further promote market consumption, and the demand for new energy vehicles will increase. The demand for materials such as lithium carbonate will also follow suit.

Fifthly, the upstream and downstream of lithium batteries have relaxed their resistance towards high priced lithium carbonate. On the one hand, the reduction in lithium carbonate production will affect the supply, and some companies are nearing the end of destocking in 2023. On the other hand, lithium carbonate producers are maintaining a high selling price, and there has been no significant drop in market prices. A small number of companies are wavering in their wait-and-see mentality. It is reported that some positive electrode manufacturers have gradually contacted salt enterprises and traders to prepare for procurement.

On the secondary market, "lithium carbonate" related listed companies also received a wave of "short-term dividends", and the share prices of Tianqi Lithium, Ganfeng Lithium, Shengxin Lithium Energy, Xizang Everest and other enterprises all rose to a certain extent.

Lithium carbonate futures stop "yang" decline

The 8-day consecutive bullish streak of lithium carbonate futures has ended after March 1st, and from March 4th to 5th, lithium carbonate futures fell for 2 consecutive days. As of the close on March 5th, the main contract of lithium carbonate futures, LC2407, was priced at 111550 yuan/ton. In addition, contracts such as LC2412 and LC2501 all experienced a decline of over 6%.

Industry insiders point out that the price of lithium carbonate fluctuates too much, and the future trend is subject to fluctuations. The main reason for this round of decline is that there has not been a substantial change in the supply-demand relationship, and it is still in a pattern of oversupply. In addition, due to the long-term downturn of lithium carbonate, the market is overly bullish, resulting in a brief rebound in lithium carbonate futures.

On the supply side, the production of lithium carbonate is increasing. Data shows that last week, the weekly production of resources increased by 7.2% to 7595 tons, with salt lakes maintaining 1639 tons, mica increasing by 11% to 1870 tons, and spodumene increasing by 10.9% to 3328 tons.

On the demand side, the increment is not significant. Although there is a demand for stocking downstream, most enterprises have limited acceptance of high priced lithium carbonate. In addition, inventory levels are relatively healthy, and there is no urgent need for centralized replenishment.

In addition, the sales of automobiles in the end market have not maintained an upward trend. On March 4th, the China Association of Automobile Manufacturers released the "February 2024 Wholesale Sales News of New Energy Passenger Vehicle Manufacturers". In February 2024, the wholesale sales of new energy passenger vehicle manufacturers in China reached 450000 units, a year-on-year decrease of 9% and a month on month decrease of 34%. On the other hand, as the main force of new energy vehicles, BYD sold a total of 122311 vehicles in February, a sharp drop of 37% compared to the same period last year. This is the first time since 2018 that BYD's monthly sales growth rate has shown negative growth compared to the same period last year.

Under the influence of various market factors, the cold air is transmitted to the entire industry chain, undoubtedly pouring cold water on lithium carbonate.

However, in the long run, SPIR predicts that the price of lithium carbonate will fluctuate around 150000 yuan in the central upper and lower ranges in 2024, with an expected range of 100000 to 250000 yuan/ton. The domestic lithium carbonate cost has strong support in the cost range of 80000 to 100000 yuan at the bottom.