Lithium carbonate prices in top consumer China could fall by more than 30% next year from the current level, analysts say, as growing supply from all major producers outpaces the rise in demand from battery users.
Prices of the chemical used in batteries in China, also the world's largest producer, have already tumbled 77% this year after Beijing slashed subsidies for electric vehicles from January, dragging down lithium ore prices and hurting global miners' profit margins.
The spot price of lithium carbonate hit a more than two-year low of 115,500 yuan ($16,185.54) per metric ton this week, and is likely to drop to as low as 80,000 yuan next year as global supply continues to rise, said four China-based analysts.
One of them expects the price to hit 100,000 yuan by end of this year.
Prices outside China tend to follow a similar trend, with benchmark lithium carbonate prices to China, Japan and South Korea of $18.50 per kg on Thursday, down 77% from a peak of $81 per kg in November 2022.
The most-traded January contract on the Guangzhou Futures Exchange hit a fresh low of 106,200 yuan per ton on Thursday, less than half of its listing price when trading began in July.
The price plunge will hit high-cost lithium producers, but offer some support to a slowing EV sector. China produces about 70% of the world's batteries and over half of its EVs.
Domestic EV car sales are forecast to grow 25% to 9.44 million units next year, slowing from annual growth of 31% and 89% in 2023 and 2022 respectively, CITIC Futures said last month.
A slower growth rate is also projected for the energy storage sector, the second-biggest lithium consumer, due to softening domestic and overseas demand, the brokerage added.
SUPPLY SURGE
Global lithium supply, meanwhile, will jump by 40% in 2024, UBS forecast last week, to more than 1.4 million tons of lithium carbonate equivalent.
Output in top producers Australia and Latin America will rise 22% and 29% respectively, while that in Africa is expected to double, driven by projects in Zimbabwe, the bank said.
Chinese production will also jump 40% in the next two years, said UBS, driven by a major CATL (300750.SZ) project in southern Jiangxi province.
The supply surge will result in a global lithium surplus of 12%, up from 4% this year, according to CITIC Futures.
It expects Chinese lithium carbonate prices as low as 80,000 yuan a ton in 2024, averaging at around 100,000 yuan, equivalent to production costs in Jiangxi, China's biggest producing region of the chemical.
Producers there mostly use locally mined lepidolite, a hard rock lithium ore, for production, and costs for those who own mining assets range from 80,000 to 120,000 yuan, according to two producers and two analysts.
For producers relying on external ore supply, costs can rise to 200,000 yuan per ton, analysts said.
Some major producers in Jiangxi, normally a third of the country's output, have already lowered production since September, according to information provider Mysteel.
But producers elsewhere like the lakes of northwestern Qinghai province, with costs estimated at about 50,000 yuan per ton, are still expanding.
Costs for major producers using spodumene, another ore, imported from their own mines are estimated by analysts at about 70,000 yuan.
($1 = 7.1360 Chinese yuan renminbi)
