Price trend
According to data from SunSirs' commodity market analysis system, lithium carbonate prices have recently fallen from their high levels. As of February 9, the benchmark price for battery-grade lithium carbonate on SunSirs was 136,000 RMB/ton, a decrease of 6.21% compared to the same period last week (February 2), a decrease of 2.86% month-on-month, and an increase of 71.7% year-on-year.
Supply side: Expectations for ample imports continued to rise
With the Spring Festival approaching, some lithium salt plants scheduled maintenance or holidays, leading to an estimated 16.4% month-on-month decrease in China's total lithium carbonate production in February, reaching 82,000 tons. However, the early resumption of production at Brazil's Sigma lithium mine and a 44.82% month-on-month increase in Chilean lithium salt exports to 16,950 tons in January had raised concerns about short-term supply pressure. Although such increases in supply were mostly intermittent shipments rather than a trend reversal, they had further suppressed prices amid fragile market sentiment. Meanwhile, domestic lithium salt plants had ample raw material inventories and a stronger willingness to stock up for the future. While traders maintained a strong stance on price support, a consensus on oversupply had formed in the market, further exacerbating downward pressure on prices.
Demand side: Short-term demand was seasonally contracting
During the Spring Festival holiday, the downstream market for lithium carbonate entered its traditional off-season, with demand showing a temporary contraction. Downstream cathode material manufacturers' production schedules were affected by holiday shutdowns and equipment maintenance, declining by 10-15% month-on-month. The operating rate of ternary materials saw a significant drop, while lithium iron phosphate, although supported by energy storage demand and remaining relatively stable, still saw a 17% month-on-month decrease in production from leading companies in February. Meanwhile, downstream companies had largely completed their pre-holiday stockpiling, and inventory levels have risen sharply in the past two weeks. Most companies have already covered their February demand, with some even stockpiling up to early March. Restocking activity has largely ended in the last two days, and short-term purchasing demand has slowed significantly, with only a small amount of restocking for immediate needs remaining, which is unlikely to provide effective support for prices. Furthermore, the temporary restocking that occurred during the sharp price drop (such as the restocking volume of approximately 10,000 tons on February 5th, the day the price hit its daily limit down) was mostly short-term buying on dips by downstream users, not a trend of demand recovery, and cannot change the overall weak short-term demand situation.
Increased volatility in the futures market and heightened panic accelerated the price decline
The plunge in futures prices triggered panic in the spot market, completely shattering traders' resolve to hold prices and significantly increasing their willingness to sell. To avoid further price declines, some traders chose to sell off their inventory at low prices, further depressing spot prices. Meanwhile, downstream enterprises took advantage of the price drop to delay procurement, exacerbating the supply-demand imbalance in the spot market. Excessive focus on short-term supply increases and weak demand further strengthened bearish sentiment, causing prices to fall faster than the actual fundamentals suggested. Panic selling became a major force driving prices down.
Market Outlook:
According to analysts at SunSirs, the decline in lithium carbonate prices was due to a confluence of factors. With the Spring Festival holiday approaching, downstream demand will remain in the off-season, and the recovery of sentiment in the futures market will take time. Lithium carbonate prices will still face some downward pressure. However, in the long run, the downstream new energy industry has strong growth certainty, and demand for lithium carbonate will steadily increase.
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