The futures of lithium carbonate officially launched in July, marking the return of lithium prices to a downward cycle and ending the brief rebound since May.
Currently, there is no sign of any reversal in the lithium carbonate prices, which have been continuously declining for 11 weeks.
According to data from Shanghai Steel Union, the average price of lithium carbonate (99.5% battery grade) has dropped below 200,000 yuan/ton to 198,500 yuan/ton, after reaching this level in April this year. The average price of battery-grade lithium hydroxide (coarse particles) has dropped below 200,000 yuan/ton since August 30, and now stands at 186,500 yuan/ton, reaching a new low.
What will support lithium prices in the future?
<h2>1. Continued widening of the price gap between lithium salts and lithium concentrates</h2>
Due to long-term contract prices, the adjustment of lithium concentrates prices has always lagged behind lithium salts.
In the first half of the year, the average prices of battery-grade lithium carbonate and lithium hydroxide decreased by 23.6% and 13.1% respectively compared to the same period last year, reaching 333,000 yuan/ton and 357,000 yuan/ton. In contrast, the average price of lithium concentrates with a 5% grade increased by 34.5% to $4,635/ton.
Since the launch of lithium futures in the second half of the year, the price gap between lithium salts and lithium concentrates has not only failed to shrink but has further widened.
Although the price of lithium concentrates has dropped by about 10% to $3,180/ton, the price of lithium carbonate has dropped significantly by about 33%. In the short term, it is unlikely that this price gap will narrow.
The continuous decline in the price of lithium salts, coupled with the high price of its raw material lithium concentrates, has made it difficult to reduce costs, thereby increasing the profit pressure on major domestic lithium salt manufacturers.
Therefore, in the first half of this year, almost all lithium salt manufacturers faced the dilemma of declining profits and gross profit margins, and some manufacturers have even fallen into a loss-making situation.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e02d793c-a5c9-477b-a25d-3e207229bf00.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e02d793c-a5c9-477b-a25d-3e207229bf00.png"/>
It is worth noting that although major lithium mining companies in Australia did not significantly reduce the prices of their lithium concentrate products in the first half of this year, the expected prices for the third quarter have shown a significant decline. For example, the large-scale company Talison announced that the sales price of its lithium concentrate in the third quarter of this year will decrease by 31% compared to the previous quarter, to $3,739/ton.
Therefore, the decline in lithium concentrate prices may have been delayed, but it is ultimately difficult to escape the influence of market cycles.
<h2>2. The short-term support from the auto market in September and October</h2>
From a long-term perspective, major lithium salt manufacturers on the supply side are actively expanding lithium salt production capacity. However, on the demand side, the growth of shipments from power battery manufacturers and new energy vehicle companies is relatively limited, and the overall willingness to stockpile is not high. Therefore, it seems inevitable that the lithium market will transition from supply shortage to oversupply.
There is almost a consensus in the market regarding the price of lithium carbonate next year. The futures prices of lithium carbonate from January to August next year will continue to decline, with all prices below 180,000 yuan/ton. The lowest futures price for lithium carbonate in August is expected to be around 165,000 yuan/ton.
However, in the short term, the peak sales period of the new energy vehicle market, known as the &#34;Golden September, Silver October, Bronze November,&#34; is approaching, which may provide price support for lithium carbonate.
Due to the expected significant rebound in terminal demand for new energy vehicles, the positive sentiment in the lithium market may be reignited. This could trigger a similar lithium price rebound phenomenon as seen in April this year, when the price of battery-grade lithium carbonate surged from the annual low of 17,000 yuan/ton to nearly double at 30,000 yuan/ton.
Based on historical sales data, these three months are usually the most active period in the domestic automobile market throughout the year. During the &#34;Golden September, Silver October, Bronze November&#34; period in 2022 and 2021, the total sales of new energy vehicles reached approximately 2.2 million and 1.2 million units, accounting for about one-third of the total annual sales. In these months, the monthly sales of new energy vehicles also reached their annual peak.
It is worth noting that September, as the beginning of the peak sales season, usually experiences a significant increase in month-on-month sales growth. In September 2021 and 2022, the month-on-month sales growth of new energy vehicles reached 6.3% and 11.2%, respectively, while the year-on-year growth rates were 120% and 94%, respectively.
Furthermore, last year, the lithium price remained relatively stable from April to early September, with the main price increases concentrated in two periods: January to March and mid-September to mid-November. During the first period, the price of lithium carbonate rose from 20,000 yuan/ton to 50,000 yuan/ton, while in the second period, it further increased from 49,000 yuan/ton to 60,000 yuan/ton.
Huawei Wall Street Research believes that in the first half of this year, material manufacturers, power battery manufacturers, and new energy vehicle companies have been cautious in material stocking, resulting in relatively low inventory levels. Therefore, in the upcoming peak sales season of the new energy vehicle market, these new energy-related manufacturers are expected to increase their inventory levels.
However, this rebound may be the final sprint for lithium prices in the short term.

Lithium carbonate prices fall below 200,000 again.

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