The reason for the continued decline in the price of lithium carbonate

The latest data show that as of March 20, the price of li2co3 was quoted at 293,000 RMB per tonne. After the price fell below 400,000 RMB per tonne at the end of February, it fell again to 300,000 RMB/ton in just three weeks. Judging from the price trend, it has entered an accelerated decline. The price of carbonate lithium has fallen 2.5 times faster than the past three months.

This decline has exceeded most market forecasts and is surging to a price of RMB 200,000 per tonne. According to this rate of decline, the market originally expected it to fall to a price of 200,000 RMB per tonne by the end of the year, which may come in the second quarter of this year.

It can be seen from the downward trend of li2co3 that the mismatch between supply and the lithium battery industries has been greatly alleviated. Under the expectation of the release of lithium production capacity in 2023, top 10 lithium battery companies in the world have shifted from inventory to auction inventory.

1. The downward cycle of lithium carbonate prices

According to public data, the balance of lithium mine supply and demand is based on the caliber of battery installed capacity and output caliber, and the situation of lithium mine oversupply continues to intensify. Taking 2022 as an example, its battery production satisfaction is 97%, but the battery production satisfaction gradually increases in the following years.

● The reason for the continued decline in prices

At the upstream lithium mine end, the release of lithium ore energy has accelerated, and the project will start production in 2023. The gathering of CATL, BYD, and Gotion are all accelerating production. Among them, CATL has clearly achieved mass production in 2023.

Midstream battery and material companies, most of which have expanded production and prepared materials at the end of 2022, have been overcapacity warnings under the rapid pace of enterprises, cathode materials, anode materials, separators, electrolytes and battery companies.

The 2022 report shows that battery system inventories are 70GWh, an increase of nearly 75.2% compared to 40GWh in 2021. In the downstream new energy vehicle market, Tesla set off a price war, new energy vehicles have experienced price reductions, and the demand for new energy vehicles in the new energy vehicle market at the beginning of the year did not meet expectations.

And relevant manufacturers were conservative about upstream battery orders, especially long-term orders. The upstream supply exceeds the demand, which is inconsistent with the downstream demand, which is an important reason for the cyclical decline in the price of carbonate lithium.

2. The impact of continued price declines

At present, the price of lithium carbonate has fallen below the benchmark price of 300,000 RMB per tonne. As the decline accelerates, it may fall to 200,000 RMB per tonne on the market.  What's more, lifepo4 batteries have gained much attention. From the perspective of the industry, the price of RMB 200,000 per tonne may become a node in the industrial chain that affects differentiation.

Because CATL's market plan is based on a price of RMB 200,000, it is ready to develop the automotive enterprise market. In this regard, midstream and downstream battery manufacturers and car companies have been controversial. The irregular price of it has fallen sharply because demand is much lower than expected.

● Market demand

Considering the market demand, li2co3 is likely to fall to 200,000 RMB per tonne or even lower. The other side of the matter is that in the case of policy price wars in the industry, different customers have different price adjustment cycles, but they will not deliberately reduce prices. In response to the accelerated decline in li2co3 prices, in some cases, it will affect the capacity release of battery factories.

● Car companies

Especially in the case of unstable upstream material prices, battery factories may lose more if they do more. At present, battery factories are still mainly based on clearing inventory, and car companies also need to clear inventory, because car companies have inventory. In addition, battery manufacturers should consider insurance policies, and price fluctuations will have an impact on upstream, midstream and downstream cooperation.

In addition to the impact of midstream battery manufacturing and automotive companies, the impact of the rapid decline in prices on the terminal battery recycling business cannot be ignored. The battery recycling business is expected, and the profitability of battery recycling companies has contracted in the face of an accelerated decline in the price of li2co3.

Originally, the price of carbonate lithium  was 300,000 RMB per tonne, but when the waste battery was actually traded, it may be traded with a price factor of 200,000 RMBper tonne or even lower. Especially in the early stage, if the waste batteries purchased at a high price are hoarded, it will directly lead to the loss or even bankruptcy of the relevant manufacturers.

The price of lithium and carbonate continued to decline, even falling below 200,000 RMBper tonne. Small battery recycling manufacturers may find it difficult to make a profit, and for large battery recycling companies, the scale, recycling channels and related technologies and equipment are tested to reduce the cost of recycling.

3. The resource side still benefits

In the case of small and medium-sized enterprises still seeking development, top 10 battery-grade lithium carbonate companies in the leading stage and have made a lot of money. From the cost data of different lithium carbonate acquisitions, taking lithium ore as an example, the comprehensive cost of its extraction is 70,000 RMB per tonne. If it is salt like lithium extraction, the price will even be as low as 20,000 RMB / ton.

At this stage, lithium carbonate is at a price of about 300,000 RMB per ton, and the upstream resource side is still in the stage of profiteering. Even if it is subsequently reduced to 200,000 RMB/ton, the resource side will still obtain excessive economic benefits for the entire lithium battery industry chain in the short term. It is not difficult to understand that in the case of less than half the price of lithium carbonate in half a year, the lithium battery industry chain has no less momentum for the layout of lithium resources.

Looking back at the entire lithium battery industry chain, the lithium price and carbonate has experienced a cyclical decline in one year, but no matter what kind of cyclical trend it is, it has caused harm to the middle and downstream industries. The former erodes the profits of the middle and downstream industrial chains, triggers the expansion of lithium resources and related production capacity in the middle and downstream industrial chains, and triggers a crisis of overcapacity.

The latter restricts the release of midstream and downstream production capacity due to lower profits, affecting the signing of long-term orders and other cooperation among related manufacturers.

4. Conclusion

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