Lithium Carbonate Price Trends: Lithium carbonate prices have stabilized below CNY 97,500 per tonne, following a significant drop from the highs of 2023, indicating a market balance between supply and demand.
Demand Slowdown: A decrease in electric vehicle (EV) sales optimism in China and plateauing EV battery sales in the US have contributed to muted lithium demand.
Supply Glut Impact: High inventories, resulting from previous subsidies in China, are leading to reduced restocking by battery manufacturers and limiting lithium bidding.
Long-term Market Outlook: Forecasts suggest that the next lithium deficit may not occur until 2028, with global carbonate equivalent supply expected to significantly increase by 2024.
Detailed Analysis
Demand-Supply Equilibrium: The current equilibrium in the lithium market reflects changing dynamics in EV sales and battery manufacturing, leading to a shift from previously high demand and price levels.
Market Players’ Forecast: Key market players’ revised forecasts indicate a longer-than-expected period of surplus in the lithium market.
Supply Increase Projections: UBS’s projection of a 40% jump in global carbonate equivalent supply by 2024 suggests a deepening surplus, impacting future price trends.
Conclusions
Cautious Market Approach: Investors and companies in the lithium market may adopt a cautious approach, considering the current supply glut and muted demand.
Monitoring EV Market Trends: Close monitoring of EV sales trends in major markets like China and the US is essential, as these are key drivers of lithium demand.
Supply Chain Strategies: Companies might review their supply chain and inventory management strategies in light of the high lithium inventories and anticipated supply increases.
Long-term Investment Perspective: Investors could consider the long-term market outlook, focusing on developments that could alter the supply-demand balance, such as new technological advancements or changes in EV subsidies.
Potential Scenarios
Scenario 1 – Sustained Low Demand and High Supply: If the current trend of low demand and high supply continues, lithium prices could remain subdued, affecting profitability in the lithium market.
Scenario 2 – Revival in EV Sales: A potential revival in EV sales, possibly due to new policies or technological advancements, could lead to increased lithium demand, impacting prices and market dynamics.
Scenario 3 – Supply Chain Disruptions: Any disruptions in the lithium supply chain, whether due to geopolitical events or environmental factors, could lead to temporary shifts in market dynamics, potentially affecting prices and availability.
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