SunSirs: Changes of "Lithium" Sector After De-stocking for 8 Consecutive Weeks

The current inventory structure of the lithium industry is also improving, with a clear sign of upstream inventory shifting to downstream inventory. Looking forward to the future market, it is necessary to pay attention to the sustainability of demand after the "Golden September and Silver October" peak season. If demand marginally weakens, and the inventory decreases turn into inventory accumulation, the price focus of lithium futures may gradually decline.

Since August, the lithium carbonate industry has been in a state of de-stocking for 8 consecutive weeks. Data shows that the weekly inventory of lithium carbonate on the week of September 26th was 136,800 tons, a decrease of 4% compared to the week of August 7th, which was 142,400 tons.

Yu Shuo, a futures analyst at Chuangyuan, told reporters that the lithium carbonate industry has shown a continuous trend of reducing inventory, mainly because the demand side is growing faster under the current market pattern of "double strong" supply and demand. The current trend of inventory reduction is just a temporary adjustment and not a sign of industry recovery.

On the demand side, Yu Shuo said that all the data in August this year showed a significant increase compared to the previous month. Among them, the production of lithium iron phosphate was 316,000 tons, an increase of 9% compared to the previous month; the production of batteries was 160GWh, an increase of 11% compared to the previous month; the production of energy storage batteries was 50GWh, an increase of 13% compared to the previous month. "From January to August this year, the year-on-year growth rate of all the data on the demand side was higher than that of the same period last year," Yu Shuo explained. September and October are traditional demand peaks. Compared with August, it still maintained a positive growth trend, and the demand growth rate far exceeded market expectations.

On the supply side, since Ningde Times' Jiayangwo project announced production suspension on August 9th, domestic lithium carbonate mica source production has significantly weakened, declining from a peak of 5,000 tons per week to 2,500 tons per week. However, as Yichun Yinli completed maintenance and resumed production, weekly production rebounded to 2,800 tons. Relevant data show that after the production suspension of Jiayangwo project, the monthly lithium carbonate production from the lithium mica source decreased by about 9,000 tons. "This change meets market expectations, but the increase from the lithium pegmatite source has made the total supply not decrease but increase," said Yu Shuo. Currently, the weekly lithium carbonate production from the lithium pegmatite source has increased from 9,000 tons in July to 13,000 tons, which not only compensates for the decrease in lithium mica source but also brings additional increment. Under this trend, the total weekly production on the supply side has also exceeded 20,000 tons, setting a new historical high.

It is worth noting that the current inventory structure of the lithium industry is also improving, with a clear trend of upstream inventory shifting to downstream inventory. Data shows that from August 7th to September 25th, upstream smelting plant inventory fell from 51,000 tons to 33,000 tons, a decrease of 35% month-on-month; downstream inventory increased from 48,000 tons to 61,000 tons, an increase of 27% month-on-month.

Liu Qiyue, a futures analyst at Industrial Bank, said the structural change in which upstream inventory is being reduced and downstream is actively replenishing its inventory reflects the relatively positive growth rate of actual downstream demand and the positive expectations of cathode companies for future demand.

Overall, Yu Shuo believes that the current weekly drawdown of about 1,000 tons in the lithium carbonate industry is not particularly fast compared to the total market inventory of 137,000 tons.

"Recently, demand has been on a continuous upswing for several months, driving the material factory's purchasing enthusiasm, and the inventory demand before the National Day has also synchronously pulled the purchasing power. At the same time, material factories are generally active in purchasing at the low point of prices." said Wang Zihan, senior lithium battery analyst at SMM. Overall, the inventory cycle of downstream material factories has slightly increased from the original within 14 days to 15 to 16 days.

From the chart, the current futures price of lithium carbonate is fluctuating around 73,000 RMB/ton. On September 26, the main contract of lithium carbonate futures closed at 72,880 RMB/ton, down 0.95%. "The improvement in demand, accompanied by an increase in supply, has limited the overall inventory reduction," said Wang Meidan, an analyst at Guosen Futures, explaining that although the lithium carbonate industry's peak season inventory reduction trend remains unchanged, the overall contradiction is not prominent. The current stable price trend of lithium carbonate is the result of the expectation of supply disruptions and the downstream enterprises' inventory replenishment.

Looking ahead to the future market, Yu Shuo believes that attention needs to be paid to the sustainability of demand after the "Golden September and Silver October" peak season. If demand marginally weakens, and the transition from inventory reduction to inventory accumulation occurs, the price focus of lithium carbonate futures may gradually decline.

"Before the National Day holiday, downstream enterprises are optimistic about production and inventory replenishment, and the expectation of lithium resource events still lingers, which provides support for lithium prices." Liu Qiyue believes that as we enter October, mining companies may enter the process of changing permits, and supply-side disruptions may resurface, potentially leading to a return to a loose supply expectation. At that time, the futures price of lithium carbonate may come under pressure.

As an integrated internet platform providing benchmark prices; On September 30th, the benchmark price of lithium carbonate (battery grade) on SunSirs was 73,300.00 RMB per ton, a decrease of 6.71% compared with the beginning of this month (78,573.33 RMB per ton).

Application of SunSirs Benchmark Pricing

Traders can price spot and contract transactions based on the pricing principle of agreed markup and pricing formula (Transaction price=SunSirs price + Markup).

If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.