China’s lithium market has suffered a devastating blow, with prices plunging to a 26-month low. This dramatic downturn is primarily attributed to an unexpected surge in supply, as demonstrated by a trial delivery to the Guangzhou Futures Exchange, a major player in the global battery metal industry.
A Shocking Turn of Events: The most actively traded lithium futures for January on the exchange saw a modest 1% increase on Friday, wrapping up the week at 124,050 yuan (approximately $17,202.65) per metric ton. This number represents a 10% decline over the week, following a 7% drop the previous week, as reported by Reuters.
Thursday witnessed a staggering 7% plummet in prices, bringing them to less than half of their value since the commencement of trading in July. This abrupt nosedive was sparked by a test delivery for the new contract, revealing an unexpectedly high availability of lithium that caught market analysts and traders off guard.
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Zhang Weixin, a lithium analyst at China Futures, informed Reuters, “The trial disappointed those who had bet on a shortage of deliverable goods when the contract matured, accelerating the price fall.”
This downturn in futures has also impacted spot lithium prices. Fastmarkets MB-LI-0036 reported an 11% decrease in spot lithium carbonate this week, hitting a 26-month low at 129,000 yuan per ton. This marks the most substantial weekly decline in the past seven months, following a 4% fall last week.
According to Zhang, prices could potentially drop to 100,000 yuan per ton by the end of the year, with no signs of a demand increase. This is a stark contrast from last November when prices nearly reached 600,000 yuan, prior to China ending its national electric vehicle subsidies.
The market is also feeling the pressure of increased domestic production of lithium carbonate and reduced costs for raw materials. The price for spodumene, a crucial lithium chemical raw material, has plummeted to $1,590 per ton this week, marking an 80% decrease this year and the lowest since August 2021.
Assessing the Impact on Major Lithium Miners Since Nov. 24, 2021:
Albemarle Corporation ALB: Over the past two years, the stock has declined by over 52%.
Sociedad Química y Minera de Chile SQM: Shares are down over 21% since Nov. 24, 2021.
Livent Corporation LTHM: The stock has declined by over 55% over the past two years.
Lithium Americas Corp. LAC: The stock is down over 68% since Nov. 24, 2021.
Ganfeng Lithium GNENF: Shares have declined by over 81% over the past two years.
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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.