After two consecutive daily limits, lithium carbonate futures fell below the 100,000 yuan mark, how lithium prices reversed

Lithium carbonate futures in December were up and down.

On December 11, the main contract of lithium carbonate futures turned from rising to falling, and the main contract opened up more than 11%, once approaching the limit, but then fell rapidly, as of the close, lithium carbonate futures fell nearly 5%, falling below the 100,000 yuan/ton mark. On December 8, lithium carbonate futures closed at 103,100 yuan/ton, returning to above the 100,000 yuan/ton mark, and only the next weekend, lithium carbonate futures fell below 100,000 yuan/ton.

Judging from the news, the Guangzhou Futures Exchange announced late at night on December 7 that it would make adjustments to the price limit of some lithium carbonate futures contracts. Zhu Keli, founding president of the National Research Institute of New Economy, said in an interview with the Beijing News that the roller coaster trend of the lithium carbonate futures market is the result of a combination of factors, and the excess liquidity in the financial market has exacerbated the speculative atmosphere of the market to some extent, increasing the price volatility.

Lithium carbonate futures are now on a "roller coaster" market, two down limits after two limits, how will the follow-up go? 

In the trading day in December, the price of lithium carbonate futures came out of the ups and downs, and the board was closed for 4 trading days, and on December 4 and December 5, it fell for two consecutive trading days. In response to the unilateral decline in the market, the Guangzhou Futures Exchange regulated the lithium carbonate futures LC2401 contract, and on December 7, the lithium carbonate futures contract was limited across the board, which was also the second time since the listing of lithium carbonate futures, and the continuous daily limit was held on December 8.

For the previous lithium carbonate futures and spot continued to fall, Jia Ruibin, director of the Zijin Tianfeng Futures Research Institute, analyzed that the first is the imbalance between supply and demand in the lithium carbonate market, and the second is that the price of lithium carbonate in the early stage is too high, resulting in excessive investment, overcapacity and increased market supply of some enterprises;

He further said that the quality standards of the delivered goods determined in the simulated delivery caused controversy, and the premium setting of industrial carbon and electric carbon led to the market to have hidden concerns about the abundant supply of goods for the first delivery, which was the main reason for the decline in futures prices;

Zhongtai Futures analysis said that futures prices may usher in a short period of strength, but the market has not undergone a major change, the long-term supply of lithium carbonate is still sufficient, and it is expected that this round of rebound space is limited, and it should be treated with the idea of over-falling, violent rebound, and still volatile and bearish in the later stage.

As for whether this round of lithium carbonate futures rally is sustainable, Zhu Keli believes that this needs to be cautious, although the price may continue in the short term, it does not mean that a long-term price inflection point has arrived, and the current market sentiment is more affected by short-term factors, which may change in the future. Yuan Shuai, deputy secretary-general of the Zhongguancun Internet of Things Industry Alliance, also believes that further observation is needed for whether the rise is sustainable.

Spot prices have fallen by nearly 80% compared with the beginning of the year, and the downward impact on corporate profits will be reversed in the future

Since the beginning of this year, lithium carbonate prices have begun to enter a downward channel. In terms of spot, on December 8, the spot price of battery-grade lithium carbonate ranged from 112,000 yuan/ton to 125,000 yuan/ton, with an average price of 118,500 yuan/ton, a decrease of nearly 80% compared with 500,000 yuan/ton at the beginning of the year.

Zhu Keli and other industry insiders generally believe that the main reason for the decline in lithium carbonate prices is overcapacity, and from the perspective of supply and demand, supply exceeds demand, and prices will gradually fall. The reporter combed and found that at the end of October, various lithium salt plants gradually resumed production, and the price of lithium carbonate began to accelerate downward, and the situation of excess supply and demand was further highlighted.

In the context of the decline in lithium carbonate prices, the performance of lithium mine-related companies has also been impacted. Wind data shows that after the 19 A-share listed companies in the lithium mining sector generally reached the peak of profitability in the third quarter of last year, the performance growth rate began to decline to varying degrees. As of the end of the third quarter, in addition to the slight growth of Sichuan Energy Power and Sinomine Resources, the profits of 17 companies in the lithium sector, including Ganfeng Lithium, declined, and the net profit growth rate of 11 companies fell by more than 50% year-on-year.

In addition, according to Wind's profit forecast for the lithium index, the comprehensive value of the industry's net profit attributable to the parent company in 2023 will be 54.360 billion yuan, a year-on-year decrease of 48.92%. Huatai Futures analysis said that in the short term, there are more spot in the hands of traders after the manufacturers at the end of the salt lake are released, and the lithium carbonate imported from overseas has arrived in Hong Kong one after another, resulting in a significant increase in lithium carbonate in the short term, and there is still pressure on spot prices. The competition in the terminal new energy vehicle market is fierce, and the price continues to be reduced, and downstream enterprises are more cautious in procurement, and the support for prices is weakened. At present, the transaction situation of the spot market is generally slowing down, the growth rate of the terminal consumer market is slowing down, the downstream battery inventory is still high, the willingness of the industrial chain to reduce costs has increased, and the willingness to push prices upwards has been increasing, and the downward cycle is expected to continue.

Zhu Keli believes that for the price trend of lithium carbonate, it is expected that market volatility may continue for some time, but in the long run, the price will tend to stabilize. Jia Ruibin further said that the long-term trend of lithium carbonate prices can be seen from several aspects, one is that the continuous growth of demand for new energy vehicles will have a certain support for the price of lithium carbonate; second, the expansion and development of lithium carbonate production capacity will increase the market supply and put pressure on prices; third, the continuous progress of battery technology may further reduce the use of lithium carbonate and affect its price.

He believes that lithium carbonate prices may fluctuate within a certain range in the future, and in the long run, the price trend depends on various factors such as industry capacity expansion, policy adjustment, and battery technology development. In the view of Mo Ke, chief analyst of real lithium research, as the supply of lithium carbonate continues to increase, the price of lithium carbonate will still be in a downward channel next year, and this momentum may continue until 2025.

Guosen Futures Research Report believes that compared with the current high inventory level, the amount of destocking is still limited, and the supply and demand of lithium carbonate are still in a surplus situation. It is estimated that the total supply of lithium carbonate in mainland China will be about 990,000 tons in 2024, and the demand will be about 879,000 tons.

Beijing News Shell Financial Reporter Wang Linlin

Edited by Yue Caizhou

Proofread by Liu Baoqing