Seaborne East Asian lithium prices shrug off Chinese weakness
Seaborne East Asian lithium prices have held steady in recent weeks amid the limited spot trading typically experienced toward the end of the year, bucking the current weakness in the Chinese lithium market
Chinese lithium prices have been on a downtrend in the past few weeks, coming under pressure from softening demand and a subdued outlook for the market.
“Traditionally, whenever lithium prices in China start to rise or fall, the strength or weakness will filter through to the seaborne East Asian market after a week or two,” a Chinese battery materials producer source said.
But this has not been the case of late, with market participants attributing the resilience of prices in the seaborne East Asian market amid the weakness in China to limited spot trading, healthy demand and the strengthening of the Chinese yuan against the US dollar.
Fastmarkets’ daily price assessment for lithium hydroxide monohydrate, LiOH.H2O 56.5% LiOH min, battery grade, spot price, cif China, Japan & Korea was $84-86 per kg on Friday December 9 unchanged since November 22.
The corresponding daily price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot prices, cif China, Japan & Korea was $80-82 per kg on Friday, unchanged since November 8.
In contrast, Fastmarkets’ assessment of the lithium hydroxide monohydrate, LiOH.H2O 56.5% LiOH min, battery grade, spot price range, exw domestic China was 550,000-570,000 yuan ($78,879-81,747) per tonne on Thursday, down by 10,000-20,000 yuan per tonne from 570,000-580,000 yuan per tonne a week earlier.
The Chinese lithium hydroxide price started to trend downward on December 1, snapping an uptrend that had been in place since early August.
Similarly, Fastmarkets’ assessment of the lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range, exw domestic China was 560,000-575,000 yuan per tonne on Thursday, down by 10,000 yuan per tonne from 570,000-585,000 yuan per tonne a week earlier.
The recent run of weakness in the Chinese lithium carbonate price, which started on November 24, put an end to an uptrend that had been in place since early May.
Multiple market participants told Fastmarkets that they had not done nor heard any activity in the spot East Asian market for a while during the typically quiet year-end period.
“It is the end of the year. Traditionally, Korean companies limit spot purchases or any cash flow and destock to show a better financial performance in their annual reports. So spot buying of lithium salts has been rare,” a South Korean consumer source told Fastmarkets.
The seaborne East Asian market will likely remain quiet until the Lunar New Year holidays (January 21-27) are over, especially with the upcoming Christmas holidays in Japan and South Korea and with New Year holidays also being observed across the region, according to a Chinese producer source.
Furthermore, multiple Chinese lithium producer sources have told Fastmarkets that they have limited tonnages available and could not spare much if they were asked for spot material, which has also put a cap on spot trading.
“We are focused on our commitments to long-term deliveries of lithium hydroxide now and have not done spot trades for a while. In addition, we do not have extra material for the spot market even if there is spot demand,” a second Chinese lithium producer source said.
Yuan’s recent strength against the dollar
The yuan has strengthened against the US dollar recently, which has offset the influence of falling Chinese lithium prices, market sources told Fastmarkets.
The exchange rate was 6.96925 yuan to $1 on Friday, compared with 7.14567 yuan to $1 two weeks earlier, according to currency exchange website Oanda.com.
“Even though lithium prices in China are weakening, the appreciation of Chinese yuan against the US dollar offsets much of the impact, because it means the same amount of US dollars now equates to fewer Chinese yuan,” a third Chinese lithium producer source said.
‘Two different markets’
“Ultimately, the seaborne East Asia and domestic China are two different markets with different dynamics,” a fourth Chinese lithium producer source said.
While China is seeing softening lithium demand recently, demand in East Asia remains healthy and stable, despite the slow spot activity, market participants told Fastmarkets.
“Our long-term contracts are being delivered as normal and demand has remained stable and healthy. We do not experience the same weakness as China is experiencing now,” a second South Korean consumer source said.
“While consumers in Japan and South Korea have tried to press lithium prices down slightly due to the weakness in China, in the end they can still accept lithium prices as they are now in East Asia based on the dynamics in the region, where in general the supply of lithium hydroxide is still tight,” the fourth Chinese lithium producer source said.
Visit our dedicated battery materials page to discover more insights on the factors at play in the industry in 2022 and beyond.