Lithium carbonate contracts on China's Guangzhou Futures Exchange (GFEX) have dipped below the 200,000 yuan/t ($27.4/kg) mark, echoing a continued downtrend in the spot market that started in mid-June.
The most-traded January 2024 contracts fell to Yn195,350/t ex-works on 15 August, down by 21pc from the exchange's launch price of Yn246,000/t on 21 July. The January contracts were closed at Yn210,500/t on 10 August and Yn217,000/t on 8 August.
A slowdown in demand from the electric vehicle (EV) power battery segment, coupled with rising supplies and significant cuts in vehicle prices by EV manufacturers', has dampened sentiment in both spot and futures markets, according to market participants.
The current future prices stand below the fixed lithium carbonate purchase price of Yn200,000/t proposed, in February, by China's largest power battery producer Contemporary Amperex Technology (CATL). CATL proposed to link battery purchases to lithium prices in the second half of this year to lower feedstock costs in battery manufacturing under a new pricing mechanism. This fixed price was based on CATL's price projections at that time, market participants said.
Argus assessed the range for battery-grade lithium carbonate at Yn230,000-245,000/t ex-works on 15 August, down by more than 50pc from the beginning of the year and by 58pc compared to late November when prices hit a record high.
Many consumers within the battery sector continue to destock, with only a handful making necessary purchases. Some major lithium-ion battery producers have even begun to purchase carbonate directly from producers, before supplying it to cathode active material producers for processing. The actions of these major battery producers have led to a further reduction in spot carbonate prices, market participants told Argus.
Argus forecasts that global lithium output capacity will rise above 1.3mn t/yr lithium carbonate equivalent (LCE) by 2024, up from less than 1mn t/yr LCE in 2022. The additional supplies resulting from expansions at major mines will ease supply constraints and push lithium prices downward in 2023 compared to the ceiling in 2022, said participants.
Several China-based EV producers, including Tesla, SAIC Volkswagen, Chery New Energy, Zeekr, Nio, Leapmotor and Nezha, have decreased their vehicle prices from August, with the biggest decrease up to Yn60,000/unit. China's 2030 and 2060 decarbonisation goals have led to an increase in domestic EV producers, with the country now having over 70 of such manufacturers, intensifying competition, said participants.
Additionally, there are concerns of oversupply in the main downstream sector - lithium iron phosphate (LFP) - for lithium carbonate. China's total LFP output capacity is likely to reach nearly 5mn t/yr if all planned new production projects come on stream as scheduled, according to industry projections.
