Lithium Carbonate Futures Price Drop And Impact on Production Capacity

Lithium carbonate futures price fell below 100,000 yuan ($14,104.40), and about one-third of production capacity faced losses

The analysis pointed out that at the current price, about one-third of the lithium carbonate production capacity is already facing losses, concentrated in the lepidolite link. Dragged down by downstream links, the industry as a whole has shown sluggish consumption, which may cause this price drop to be overcorrected.

In the past year, the price decline of lithium carbonate has gradually deepened.

On December 4, the main lithium carbonate futures contract 2401 fell 6.95%, close to the lower limit, closing at 96,350 yuan/ton, a new low since the futures product was launched in July, and fell below the 100,000 yuan mark for the first time.

As the settlement target of lithium carbonate futures of Guangzhou Futures Exchange, the lithium carbonate price index of Shanghai Nonferrous Metal Network (SMM) also continued to fall. On December 4, the index price was about 126,900 yuan/ton, down 1.22%.

Spot prices are also falling accordingly. Data from Shanghai Steel Federation shows that the average spot price of battery-grade lithium carbonate fell by 2,000 yuan/ton on December 4 to 129,500 yuan/ton. In the past year, the price of battery-grade lithium carbonate on this platform has dropped by nearly 80%.

Currently, the market is more sensitive to the price mark, and as the main contract 2401 delivery date approaches, the market's pessimism is getting stronger.

Huatai Futures pointed out that futures contracts have a long expiration time and are expected to be greatly affected by macroeconomic sentiment and funds in the short term. Some traders, under inventory pressure, want to exchange volume at a low price, and their quotations have fallen sharply.

Lithium carbonate is one of the main lithium salt products, and the upstream raw materials are lithium ores, including lepidolite ore, spodumene ore, etc. Battery-grade lithium carbonate is an important raw material for lithium batteries and is mainly used as cathode materials for lithium iron phosphate, lithium cobalt oxide and some ternary lithium.

Tongguan Jinyuan Futures pointed out that the cash cost of lithium extraction from mainstream self-owned mines is around 80,000 yuan/ton. When the price of lithium carbonate fell to 100,000 yuan/ton, Ningde Times (300750.SZ) Lithium extraction from Jianxiawo Mine has been falling into losses. This shows that at current prices, except for Jiangxi Tungsten Industry’s Yichun tantalum-niobium tin mine, most mica lithium extraction companies are in losses.

The agency pointed out that at current prices, about one-third of lithium carbonate production capacity is already facing losses, concentrated in lepidolite. Dragged down by downstream links, the industry as a whole has shown sluggish consumption, which may cause this price drop to be overcorrected.

There has been a significant cost inversion in the lithium carbonate produced from outsourced spodumene. According to SMM statistics, as of last week, the cash cost of lithium produced from imported lepidolite was approximately 117,900 yuan/ton, a month-on-month decrease of 1.45%, and the cash cost of purchased lithium from spodumene concentrate was approximately 147,300 yuan/ton, a month-on-month decrease of 2.49%.

From the supply side, Baichuan Yingfu data shows that the output of lithium carbonate last week was about 8,500 tons, a decrease of 400 tons month-on-month. The main reason is that the price of lithium continues to decline. Upstream lithium salt plants are facing high cost pressure, and there are production reductions and suspensions. .

Most of the other lithium salt plants that are still in production are mainly engaged in pure processing, manufacturing for lithium battery companies and earning a certain amount of processing profits. This situation is mainly reflected in waste recycling and lepidolite raw material production companies in Jiangxi.

Analysis by CITIC Construction Investment pointed out that the current production of spodumene is relatively stable, especially for production companies in Sichuan, where costs are generally low and companies are producing normally. In addition, the current output of the Qinghai Salt Lake region has not been significantly reduced, and the impact of production reductions caused by weather and environmental protection is not significant.

From the perspective of demand, downstream cathode manufacturers are in the process of involution. CITIC Construction Investment pointed out that cathode material factories have serious overcapacity, resulting in vicious competition. In the long run, the production capacity of cathode factories will be compressed, and some companies will be eliminated.

Baichuan Yingfu said that some downstream cathode companies have chosen to suspend production and reduce production because outsourced materials are too expensive and cost inversion is serious.

The Tongguan Jinyuan Futures Research Report pointed out that most downstream purchases have been suspended to digest existing inventory. The monthly long-term contracts of some enterprises have been suspended, and the operating rate of enterprises is low. Lithium carbonate companies as a whole report difficulties in shipping; battery companies are also facing difficulties, with orders from some companies sluggish and Tianjin Gateway Power, a subsidiary of Fosun Galaxy, shut down.

According to Jinyuan Futures, orders from automobile wheel hub and frame companies are currently stable, indicating that there are no large-scale changes in the production schedule of end-use car companies. However, due to the expansion of downstream production capacity in the early stage is stronger than that of end-use car companies, cathode material factories and battery factories are in a difficult situation. .

It is not clear whether the price of lithium has bottomed out, but the increase in mining volume and arrivals at the port are still continuing. According to the analysis of the above-mentioned institutions, the goods of the Australian mining company SQM are about to arrive in the port. According to the 17,000 tons of lithium carbonate export volume released by Chile in October, the scale of this arrival is relatively large.

Regarding the price trend of lithium carbonate next year, Guosen Futures predicts that the overall operating range will be 80,000-150,000 yuan/ton.

The agency pointed out that as the downstream demand side of lithium carbonate, China's power battery industry is entering a period of steady growth. After experiencing rapid market expansion in the early stage, excess supply and demand began to appear, funds have gradually returned to rational investment, and the industry's growth rate will gradually decline. to a relatively stable level