Lithium carbonate prices in China rose to a record-high 510,500 yuan/tonne in September, soaring over 80% year-to-date as surging demand coincides with lower supply. Added stimulus and cash incentives by local Chinese governments spurred growth in demand of electric vehicles in the world’s second largest economy, notching a 100% year-on-year increase in August.
In the US, demand for electric vehicles is set to increase as the newly passed “Inflation Reduction Act” extends tax breaks for new electric vehicle purchases. On the supply side, the energy crisis in China brought by record-setting heat waves led multiple lithium producers in Sichuan to suspend operations, adding to the upside of soaring lithium costs in the near-term. Scarcity led auto manufacturers with large bets on battery electric vehicles to compete for long-term supply contracts, including Ford and Stellantis. Also, electric vehicle giant Tesla mulled building its own lithium refinery in Texas.
Trading Economics provides Lithium pricing based on spot prices for Lithium Carbonate, 99.5% Li2CO3 min, battery grade, traded in China.
Lithium is a silver-white light metal. Lithium hydroxide is used in batteries for electrical vehicles and mobile phones. Lithium hydroxide is produced from a chemical reaction between lithium carbonate and calcium hydroxide. The biggest lithium producers are Chile, China, Australia and Argentina. The largest lithium importers are China, Japan, South Korea and the United States.
Not only spot prices, upstream lithium auction also hit a record high. On September 20, the ninth auction of Australian Pilbara lithium concentrate, known as the "global lithium price trend vane", the final price was $6,988 / ton (5.5% grade, FOB Tehran port), the Chinese CIF price of 6% grade was $7,713 / ton, about 10% higher than the last month's auction price, a new record. Based on the freight calculation of us $90 / ton, the cost of battery grade lithium carbonate is about 513,000 yuan / ton, and the product is expected to circulate in January-February 2023. Analysts pointed out that the Pilbara lithium concentrate auction price has boosted the global lithium prices, which also means that lithium prices will remain high in the short term.
On the supply side, the tight supply at the mining end limits the capacity utilization rate of the smelting end. The enterprises suspended by the mining source in the early site have not opened the plan, and some enterprises have annual maintenance. In addition, as Qinghai enters winter, the output may decline. Field supply can not match the demand, the contradiction between supply and demand and the cost pressure will support the trend of lithium price. On the demand side, the demand boom continues, especially the gold nine silver ten and the end of the loading period will catalyze downstream demand.
The industry believes that the supply and demand mismatch is the root cause of high lithium prices. In a short period of time, the supply and demand of battery grade lithium carbonate is difficult to balance, and the price may continue to rise.