Lithium Carbonate: Continuous Price Decline

As expected by the industry, lithium carbonate is almost destined to fall below the psychological threshold of 200000 yuan/ton. Domino's dominoes will trigger a chain reaction, not only will the "lithium ore rebate" plan of Ningde Times be doomed, but higher cost lithium salt manufacturers will suffer losses or even go bankrupt, and it will also exacerbate the wait-and-see sentiment of industry chain enterprises.
According to the latest quotation from Shanghai Nonferrous Metals Network, on April 7th, lithium carbonate (99.5% battery grade/domestic) fell by 5000 yuan to 210000 yuan/ton. According to the current trend, a drop below 200000 yuan/ton is already firmly established.
Previously, Ningde Times implemented the "lithium ore rebate" plan to lower prices for purchases from upstream lithium material manufacturers, offering discounts to some high-quality customers such as Ideal, NIO, Huawei, and Jikron, locking the settlement price of lithium carbonate at 200000 yuan/ton. If the price of lithium carbonate drops below 200000 yuan/ton, this plan will also lose its significance.
In fact, industry insiders have further lowered their expectations for the price of lithium carbonate. During an interview with Battery China at the 2023 Hundred People Conference Forum, Wang Yu, Chairman of Funeng Technology, bluntly stated, "In this year's situation, it is expected that the price of lithium carbonate will rapidly decline, and it is estimated that it will further decline. It is not impossible to reach below 100000 yuan/ton
The pattern of supply and demand has changed
The basic market logic is that if you rise too much, you will fall down. As Li Liangbin, the chairman of Ganfeng Lithium Industry, said, "If there were 600000 yuan per ton yesterday, there could be 100000 yuan per ton tomorrow." And just a few months ago in November 2022, the highest price of lithium carbonate soared to an unattainable level of about 600000 yuan per ton, and now it has dropped by over 60%.
In the past, with the rapid development of new energy vehicles, complete vehicle manufacturers have also invested a lot of money. In order to achieve performance, they have lost a lot of money. Many complete vehicle manufacturers cannot afford to spend a lot of money this year to compensate. If the price does not meet expectations, they may reduce production. In addition, the mass production of sodium batteries has already had an impact on the lithium carbonate industry, "Wang Yu analyzed.
In fact, the new energy vehicle market industry this year is clearly not as good as last year, and the cooling effect has already emerged. The China Automobile Association has predicted that the sales of new energy vehicles in China are expected to reach 9 million units in 2023, a year-on-year increase of 35%. Although still growing, it is already a "serious stall" compared to the growth rate of over 90% in 2022. In response to the battery end, some domestic battery manufacturers have begun to gradually narrow their pace.
In recent months, due to the relatively sluggish new energy vehicle market, the entire battery industry has experienced unexpected fluctuations, with both raw material and battery companies experiencing relatively high inventory levels, "said Zhang Xiaocong, Vice President of Marketing at Ruipu Lanjun.
From the supply side, Wang Yu pointed out that there is no shortage of lithium carbonate resources worldwide, and the production of lithium carbonate is not difficult in all aspects, and lithium resources are not lacking. Tesla CEO Musk also emphasized that the key limitation in the production of new energy batteries is the capacity to purify lithium, rather than exploring lithium mines.
In fact, the lithium supply and demand pattern has begun to reverse. According to China CITIC Construction Futures, the lithium supply from 2023 to 2025 is expected to be approximately 1.1225 million tons, 1.5465 million tons, and 1.831 million tons of lithium carbonate, respectively; The demand for lithium is 1.1045 million tons, 1.3612 million tons, and 1.6515 million tons of lithium carbonate, respectively. It can be seen that the industry will achieve a balance between lithium supply and demand in 2023, and there will be an oversupply after 2024.
Detected below 100000 yuan/ton, let's talk about it again
The decline in lithium prices is a huge boon for electric vehicle manufacturers. Zhu Jiangming, founder, chairman and CEO of Zero Run Automobile, stated that for every 100000 yuan/ton decrease in lithium carbonate price, the impact on the battery is 5 cents per watt hour, which is 50 yuan per kilowatt hour. This will bring a relatively good cost reduction effect, and a 50 degree electric vehicle may have a cost reduction of several thousand yuan.
Li Bin, founder and chairman of NIO Automobile, also mentioned that every 100000 yuan/ton change in lithium carbonate price will affect NIO Automobile's gross profit margin by about 2 points. If it drops to the level of over 100000 yuan/ton, (compared to last year's high price) it can release (almost) 8 points of gross profit margin.
But several families are happy and several families are worried. The lithium salt manufacturers who made a profit on lithium carbonate in the past year have now started to "go from sweet to bitter". According to media reports, Jiangte Electric, a mica lithium extraction enterprise located in Yichun, Jiangxi, recently stated that due to reduced downstream demand and increased inventory, some production lines have been suspended for dynamic adjustments.
Battery China has previously reported that the cost of extracting lithium from spodumene is usually around 70000-80000 yuan/ton, but in the absence of mines at home, the cost may exceed 300000 yuan/ton. The cost of extracting lithium from mica is even higher than that of spodumene. It is reported that the newly added production capacity of Yichun Lithium Mine in Jiangxi in 2022 can only be guaranteed if the price of lithium carbonate exceeds 400000 yuan/ton; So the manufacturers are destined to suffer losses.
Affected by the decline in the price of lithium carbonate, the price of lithium hexafluorophosphate, which is mainly made from lithium carbonate, has also fallen to the clouds in just a few months. According to data released by Shanghai Steel Union, on April 4th, the price of lithium hexafluorophosphate reached 96000 yuan/ton, a decrease of about 84% from its historical high. And the "loss cycle" of lithium hexafluorophosphate has also begun.
According to Li Yunfeng, General Manager of Dofluoro, there are currently 48 domestic lithium hexafluorophosphate production enterprises, and there are approximately 15 electrolyte enterprises with production capacity. There are more lions on the grassland than zebras. I estimate that in the next few years, 40 of these 48 enterprises will lose money (accounting for 83%), and only one or two enterprises in the industry will truly make money
The current situation faced by manufacturers of lithium salt materials is that the price of lithium carbonate is constantly falling, leading to "downstream customers not daring to place large orders". The general mentality is to wait and see, wait and see, and then wait and see. As Wang Yu said, it is also possible for the price of lithium carbonate to reach below 100000 yuan/ton.
The current price is only 200000 yuan/ton, so let's wait a little longer. Just like in the A-share market, the logic of investors is: when you hit the bottom, then take the bottom.