The Zhitong Finance App learned that according to the Business Association's product market analysis system, the price of lithium carbonate plummeted in 2023. As of December 31, 2023, the average domestic hybrid price of industrial grade lithium carbonate was 94,000 yuan/ton, down 81.35% from the average price of 504,000 yuan/ton on January 1; the average domestic mixed price of battery-grade lithium carbonate on December 31 was 103,000 yuan/ton, down 80.38% from the average price of 525,000 yuan/ton on January 1.

Looking back at the price of lithium carbonate in 2023, apart from a brief recovery in downstream stocks that needed to be replenished at the end of April and production cuts and price increases at lithium salt plants at the end of September, the price of lithium carbonate continued to decline throughout the year. The 2023 lithium carbonate price trend can be interpreted in three stages:

Phase 1 (January-April): lithium carbonate prices fall rapidly

Due to the rush for new energy supplies at the end of 2022, downstream orders for lithium carbonate weakened in the first quarter of 2023. State subsidies for new energy vehicles declined at the beginning of the year, the launch of the “lithium mine rebate” program in February, and subsequent fuel truck price reduction promotions, etc., which led to a slowdown in the growth rate of demand for downstream NEVs, triggering pessimistic expectations in the industry chain. As a result, the entire lithium battery industry chain showed a state of de-stocking in February-April. However, downstream procurement demand continued to weaken, lithium salt plants had high inventories, shipping pressure was prominent, and prices fell rapidly.

Phase II (May-July): Lithium carbonate prices ushered in a brief recovery

Since the end of April, lithium carbonate prices have gradually shown signs of correction, and the price increase continued to expand in May. However, most of the price increases this time were boosted by market demand, which improved downstream production schedules, the Cathode Materials Factory gradually started the rhythm of inventory replenishment, and the relationship between supply and demand in the market was gradually balanced. With the completion of downstream inventory replenishment, market procurement gradually returned to rationality, and prices began to fall steadily while demand was still unreleased. In addition, lithium carbonate futures contracts were listed and traded on the Guangzhou Futures Exchange on July 21, 2023. In the first day of trading, all lithium carbonate contracts showed a sharp decline, which later led the spot price of lithium carbonate to once again enter a downward channel.

Phase 3 (August-December): The overall price of lithium carbonate is declining

In August, the spot price of lithium carbonate was guided by the weakness of the futures market, and the downward speed further accelerated and continued to approach the cost line. Under the influence of pessimistic market expectations, downstream companies took the initiative to remove inventory and delay procurement as much as possible. Prices rebounded slightly in stages after production cuts in some lithium salt plants at the end of September, and then bottomed out due to multiple negative factors such as changes in the lithium ore pricing model, weak demand, and high inventories. However, the increase in NEV sales during the traditional peak season of “Golden Nine Silver Ten” in 2023 was not obvious. Production schedules in the middle of the overall industrial chain were reduced, and procurement attitudes on raw lithium salt weakened, causing the price of lithium carbonate to continue to fall. At the same time, increasing amounts of overseas resources have arrived in Hong Kong, increasing the supply of lithium carbonate in the market, causing prices to continue to bottom out.

Oversupply of lithium carbonate is likely to continue in 2024

In 2023, the lithium industry was in a state of surplus from upstream minerals to midstream materials and downstream batteries, and medium- to long-term overproduction on the supply side was quite clear. In 2024, new projects in Australia, South America, Africa and China will be put into operation one after another, climbing the slope, which will contribute a lot of growth.

In terms of lithium ore:

The price of lithium concentrate fell significantly in 2023. As of December 2023, the price of spodumene concentrate had dropped to 1,060 US dollars/ton. The decline in mineral prices in the early period was smaller than that of lithium carbonate, and the price of imported lithium concentrate accelerated after the change in pricing methods. After the fourth quarter of the Australian mine price negotiations, some mining companies adopted the M+1 pricing method, which weakened the voice of lithium ore to a certain extent, and mineral price support for lithium carbonate prices weakened.

Compared with foreign countries, domestic lithium resource projects are progressing relatively slowly. Jiangxi faces environmental pressure, while Qinghai and Tibet face multiple pressures such as poor natural environments and poor infrastructure. The main increase in domestic lithium mines in 2024 comes from the commissioning and slope climbing of porcelain ore in the Jianxiawo mining area in Fengxin County, the Lijiagou mine, and the Shuinan section of the Huashili mining area in Jiangxi. Meanwhile, the new production capacity of the salt lake mainly comes from the expansion of Char Khan Salt Lake, Xitai Jinel Salt Lake, Zabuye Salt Lake, and Jezechaka Salt Lake. Among them, Char Khan Salt Lake plans to expand 40,000 tons of LCE, making the largest increase in production capacity.

In terms of production capacity: In recent years, boosted by new energy policies, domestic lithium carbonate production has grown steadily, from 78,000 tons per year in 2016 to 395,000 tons in 2022, with a compound annual growth rate of 28%. From January to December 2023, China's total lithium carbonate production was about 460,000 tons, an increase of 31.4% over the previous year. The supply of lithium carbonate grew rapidly in 2023, but due to the continuous decline in prices and average profit levels, the operating rate of lithium carbonate was basically around 50%, and the operating rate of lithium salt plants was not high. However, some of the new production capacity projects, such as Xincun in Xinjiang, Jinhui Lithium, and CITIC Guoan, have all been put into operation, and new projects will be released one after another in the next two years. Production is expected to reach 590,000 tons in 2024, an increase of 30% over the previous year.

Import side: According to customs statistics, the country imported a total of 138,413.1 tons of lithium carbonate from January to November 2023, with a cumulative year-on-year increase of 10.54%. In a state where the domestic supply of lithium carbonate is sufficient, the continuous increase in imported lithium carbonate is putting some pressure on the domestic market.

Demand for lithium carbonate is under certain pressure in 2024

Lithium carbonate consumption in 2023 increased by about 24.6% compared to 2022. The increase was mainly contributed by the NEV and energy storage industries. The 3C industry is still adjusting, and traditional demand has maintained small single-digit growth.

Power battery sector: From January to November 2023, China's power battery production was 628.7 GWh, up 28.5% year on year. From January to November 2023, China's installed power battery capacity was 339.7 GWh, an increase of 31.4% year-on-year. Although the growth rate of installed capacity is higher than the growth rate of battery production, the absolute increase in production is still higher than the installed capacity, which is why battery inventories have been accumulating. Currently, the vast majority of lithium iron phosphate batteries are in stock. According to the current monthly installed capacity consumption rate, lithium iron phosphate batteries need to consume 5 months, and ternary batteries need to consume 1 month.

Energy storage battery sector: In 2023, the energy storage market was affected by domestic and foreign policies, inventory management, raw material prices, overcapacity, etc., and the growth rate slowed. From January to November 2023, China's energy storage battery production was 147.22 GWh. Global shipments of lithium batteries for energy storage are expected to be 220 GWh, up 38.1% year on year, but the decline in growth is quite obvious, and shipments fall short of expectations. Inventory pressure in 2024 and high overseas interest rates will continue to put pressure on the energy storage market. Global shipments of lithium energy storage batteries are expected to be close to 290 GWh in 2024. Compared with the previous two years, the growth rate of energy storage batteries will continue to slow, and the growth rate of demand for lithium carbonate will also slow significantly, making it difficult to greatly benefit lithium carbonate consumption.

In terms of new energy vehicles: China's NEV production and sales will all maintain rapid growth in 2023. From January to December 2023, China's NEV production and sales volume reached 9.587 million units and 9.495 million units respectively, with a year-on-year increase of 35.8% and 37.9%, respectively, with a market share of 31.6%; in January-November, NEV exports reached 1.042 million units, up 75.7% year on year. As the penetration rate of new energy vehicles in the Chinese market exceeds 30%, the subsequent growth rate of demand in the Chinese market may slow down. However, lithium carbonate as a raw material is in a downward cycle, and the bottom of all links in the industrial chain may become the norm, and the growth rate of demand for lithium carbonate will slow down accordingly.

Export side: According to customs statistics, China's lithium carbonate export volume from January to November 2023 was 9286 tons, a year-on-year decrease of 2.6%. In recent years, overseas lithium carbonate production has increased steadily. In addition, most of the international electric vehicle market is high-nickel models. The main raw material demand for this technology route is lithium hydroxide, so overseas demand for lithium carbonate in China is relatively limited.

The lithium carbonate futures market is fiercely competitive

On July 21, 2023, the day lithium carbonate futures were listed on the Guangzhou Futures Exchange, the listing price of the LC2401 contract was 246,000 yuan/ton. Since the listing, the price of the main lithium carbonate futures showed a one-sided decline and continued to fall below record lows. At a time when the price fell below 100,000 yuan, there was a fierce long and short game in the futures market. On the market, the price of lithium carbonate futures alternated between falling and rising. There are still several large fluctuations in the month leading up to the delivery month, which is almost at the same level as the spot market. The current lithium carbonate futures price is basically a trend vane in the spot market. The price of lithium carbonate futures will not be reflected in the spot price until the trading day. Therefore, from the approximate price of lithium carbonate futures, we can see the current price level of lithium carbonate in the next few months.

2024 Market Forecast

Looking ahead to the future market, the problem of oversupply is still the main focus of the market. In the context of oversupply, some small to medium lithium salt plants may switch to OEM, and the profit distribution between the mining side and the smelter side will also tend to be more reasonable, but the pressure on the supply side is still quite high. On the demand side, the NEV industry is gradually entering a mature period, and the demand for lithium carbonate is gradually weakening marginally. Under the high base of 2023, it is quite difficult to achieve the same growth rate in 2024. Competition in the NEV industry is becoming more intense, and the drive for car companies to reduce costs and pressure prices is even stronger. Meanwhile, increased participation in the futures market and futures linkage will gradually guide spot prices in the lithium industry chain back to rationality, which is expected to enable China's lithium carbonate industry to form a unified price system.

The price of lithium carbonate will fluctuate less in 2024 than in 2023. Mining side disturbances, supply side and downstream demand are the keys to affecting lithium carbonate prices. It is expected that if prices continue to fall in the short term, some lithium salt plants will fall into losses, and approaching the cost line will provide some support for the price of lithium carbonate. The price of lithium carbonate is expected to rise from a low point, but the increase is limited.