DEMAND FEARS
A 6.3-per-cent drop in gross sales of latest vitality automobiles, together with totally electrical automobiles and plug-in hybrids, in China in January, after they grew 90 per cent in 2022, sparked issues of softening development that might crimp demand for batteries and battery supplies.
“While we remain positive on the long-term outlook for lithium, the short-term outlook is less clear, with a clear acceleration in China EV sales needed to allay market fears,” Barrenjoey analysts mentioned in a analysis observe on Feb. 17.
Some, together with lithium large Albemarle, ascribed decrease automobile gross sales to short-term weak point given the early Lunar New 12 months. Albemarle sees China’s EV market rising 40 per cent this 12 months. But costs have continued to fall.
“Demand is still healthy, but battery and EV makers are currently destocking instead of placing new orders. The subdued spot demand therefore is weighing on sentiment and pressing down prices,” mentioned Susan Zou, Shanghai-based vice chairman at consultancy Rystad Energy.
MINERS UNFAZED
The decline in lithium costs in China, the world’s greatest client, has hit lithium producers abroad. Shares in Albemarle and Australia’s Pilbara Minerals are each down 1 / 4 since November, whereas Allkem is down about 30 per cent.
However Allkem’s chief gross sales and advertising officer, Christian Barbier, mentioned the worth slide in China “needed to happen” and was “helpful,” and mentioned it was exacerbated by the nation’s battery makers jostling for market share.
Miners’ profitability remained very sturdy, he advised analysts on an earnings name on Feb. 23.
“So that’s why we’re not too concerned about the overall fundamentals and the future direction of prices,” Barbier mentioned.
S&P analysts see the common money working price of lithium carbonate manufacturing at $5,000 per ton LCE and whole money price $8,000 per ton LCE, a fraction of the costs analysts are forecasting for lithium carbonate.
“Therefore it is quite a stretch to find the bottom for lithium prices because lithium producers will remain profitable under much lower prices,” S&P Global Commodity Insights analysts mentioned in feedback to Reuters.
LITHIUM CARBONATE SINKS
The value decline has been sharp. Chinese spot costs for lithium carbonate have fallen from close to an eyewatering 600,000 yuan ($86,207) a ton in mid-November to lower than 400,000 yuan at the moment.
They are prone to drop under 300,000 yuan by the top of this 12 months, about half the extent they peaked at in November 2022, mentioned 4 China-based analysts and 5 merchants, consumers and producers.
“A lithium carbonate price of 200,000-300,000 yuan per ton is where both upstream and downstream will feel comfortable,” mentioned Rystad’s Zou.
Even help from provide disruptions akin to an investigation into unlawful mining in China’s lithium is prone to show solely short-term, analysts mentioned.
Prices for lithium uncooked materials spodumene have hit five-month lows.
RBC Capital Markets sees spodumene costs, final at $6,000, slumping to a mean of $4,500 a ton in 2024.
“The decrease in spodumene prices has been quicker than what we anticipated,” mentioned RBC analyst Kaan Peker.
Source: canada.autonews.com