East Asian lithium prices slump amid mounting pressure from Chinese weakness

Battery-grade lithium hydroxide and carbonate prices in the East Asian market have further decreased over the recent days, depressed by the continuing price weakness in the domestic Chinese market

Given the wide price spread of lithium salts between the East Asian market and domestic Chinese market, East Asian consumers have been trying to press East Asian prices down to domestic Chinese levels, Fastmarkets heard.

“Some of our long-term customers are even proposing to include domestic Chinese lithium hydroxide prices into our floating long-term contract pricing indices; they’re fully aware of the big discount Chinese prices have over East Asian prices,” a Chinese lithium producer source told Fastmarkets during its roadshow to Chengdu city, Sichuan province.

The Chinese lithium market has been suffering from weak demand, with prices on a downtrend since mid-November last year due to the discontinuation of the country’s subsidy on electric vehicles and the recent automobile price wars.

“There are many Chinese lithium carbonate sellers who want to export to the East Asian market at Chinese price levels to cash in. They have large inventories, while lithium prices are still falling in China and demand in domestic China is muted. But not all of them are qualified to export,” a Chinese lithium trader source said.

China is the major lithium supplier to Japan and South Korea. In 2022, China exported 10,436 tonnes of lithium carbonate and 93,379 tonnes of lithium hydroxide in total, with 91.64% (9,564 tonnes) of the carbonate export and 97.17% (90,742 tonnes) of the hydroxide export bound for Japan and South Korea, according to the country’s customs data.

Lithium price updates

Fastmarkets’ daily price assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea was $40-43 per kg on Monday, narrowing downward by $2 per kg from $40-45 per kg last Friday.

Fastmarkets’ daily price assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was $28-30 per kg on Monday, down by $2-5 per kg from $30-35 per kg last Friday.

Fastmarkets’ price assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price range exw domestic China was 220,000-280,000 yuan ($31,991-40,716) per tonne on Thursday, down by 40,000 yuan per tonne from 260,000-320,000 yuan per tonne a week earlier.

Fastmarkets’ price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range, exw domestic China was 158,000-186,000 yuan per tonne on Thursday, down by 10,000-24,000 yuan per tonne from 168,000-210,000 yuan per tonne a week earlier.

East Asian lithium demand lower than expected

Lithium demand has been weak in China, while East Asian demand has not performed as well as expected at the beginning of this year, market participants told Fastmarkets.

“Battery producers in Japan and South Korea did not receive as many orderbooks as they expected earlier this year, resulting in a lower-than-expected lithium demand,” a second Chinese lithium producer source said.

To bring down the procurement cost of battery raw materials therefore was even more important for the battery producers, market participants said.

A third Chinese lithium producer source told Fastmarkets that inquiries for lithium hydroxide were picking up while the market was trending down, with consumers trying to leverage on the lower prices.

Earlier in March, Fastmarkets also noticed increasing export inquiries for Chinese lithium carbonate due to a large arbitrage window.

“Lithium consumers are not as picky with lithium hydroxide as before, because cost is more important amid underwhelming orderbooks. As long as certain requirements on the specifications are met, they can take the material. These materials are cheaper than those from major qualified lithium producers.” a Chinese analyst source told Fastmarkets.

Some consumers also asked to postpone long-term deliveries or request lower volumes from long-term orders. But they made up the cut volume from long-term deliveries by purchasing spot materials, since spot prices are much lower than existing long-term prices, Fastmarkets learned during its roadshow to Chengdu city.

“This helps them bring down the overall cost of lithium procurement,” a fourth Chinese lithium producer source added.

But many lithium consumers were in no hurry to commit to any spot deals and were taking their time to assess their offers. They expected prices to decrease while the negotiation was taking place, especially since their demand was not impending further, multiple sources told Fastmarkets.

Cheaper alternative feedstocks add further pressure

Cheaper alternative feedstocks for lithium production, including lepidolite and brines, have exerted more pressure on the East Asian and Chinese lithium markets, adding to the recent price downtrend for both.

“Production costs of lithium carbonate feeding on lepidolite is approximately 70,000-80,000 yuan per tonne if the lithium producer has its own lepidolite project, and approximately 100,000 yuan per tonne if the lepidolite has to be sourced elsewhere,” a fifth Chinese lithium producer source said.

“Production costs of brine-fed lithium carbonate is only 30,000-40,000 yuan per tonne,” the second Chinese lithium producer source said.

The large price gap between lithium carbonate feeding on cheaper feedstocks and lithium hydroxide have boosted the conversion of lithium carbonate into hydroxide.

“Looking at the current technical grade lithium carbonate price at 130,000 yuan per tonne, total production cost of lithium hydroxide converted from carbonate would be only approximately 150,000 yuan per tonne. Such low costs will drag lithium prices price in the entire Asia market,” the Chinese analyst source said.

On the other hand, major Chinese lithium producers that supply the East Asian market mainly feed on spodumene for higher, more stable product quality. Many of them told Fastmarkets that they had been struggling to transfer the downward pressure of falling lithium prices upstream to spodumene prices, keep their production cost of lithium salts elevated.

“Our spodumene long-term price was as high as $6,300 per tonne in the first quarter. Since the price is quarterly negotiated, it is lagging the decrease in lithium salts market. Given the latest lithium prices, we suffer losses by selling lithium carbonate,” a Chinese lithium producer source said.

“If the spodumene price is $4,000 yuan per tonne, the corresponding production costs of lithium carbonate is 270,000-280,000 yuan per tonne and lithium hydroxide at 250,000 yuan per tonne,” a sixth Chinese lithium producer source said.

Spot spodumene prices moved upward over the two weeks to Friday, despite continuing weakness in downstream lithium salt spot prices and tight spodumene spot availability.

Fastmarkets’ price assessment for spodumene min 6% Li2O, spot price, cif China was at $4,400-6,225 per tonne on Thursday, up by 9.54% from $4,500-5,200 per tonne on March 30. But it was still below the peak price reached on December 8 last year, when it was assessed at $8,000-8,575 per tonne.

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