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East Asian and global lithium markets experience price softening

PUBLISHED

2023-08-18

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In recent developments within the lithium market, East Asian and global prices have witnessed a downward trend, driven by weak buying appetite, sluggish demand, and a subdued summer market. Market participants have reported subdued activity in China's domestic spot market over the past week, with limited interest in spot materials as consumers predominantly rely on long-term supplies.

Sources within the industry have noted a cautious stance among consumers, with expectations of further price declines weighing on their willingness to buy. This sentiment has created a scenario where consumers are choosing to stay on the sidelines, believing that the bottom for spot lithium prices in China has not yet been reached.

The root of this weak consumer appetite can be traced to the downstream cathode sector, which has struggled to recover from a lackluster performance during the initial five months of the year. While there was a rebound in lithium prices in May due to consumer restocking, this price support has waned as the restocking phase concluded.

The market for lithium hydroxide has been particularly affected, showcasing a more bearish trend compared to lithium carbonate. This divergence is attributed to the sluggishness in China's nickel cobalt manganese (NCM) cathode sector, which contrasts with the performance of the lithium iron phosphate (LFP) sector.

Despite these challenges, some traders are offering hydroxide in an effort to offload their supplies before prices decline further, while lithium producers focus on fulfilling long-term orders. Fastmarkets' assessments reflect this market sentiment, with the weekly assessment of lithium carbonate battery-grade spot prices in domestic China falling by 20,000 yuan per tonne over the past week.

East Asian Lithium Prices Affected by Chinese Market Dynamics

The decline in domestic Chinese lithium prices has had a reverberating effect on East Asian lithium prices. The rapid drop in Chinese prices has created pressure on the East Asian market. While the spot market has seen limited activity, consumers in the region are apprehensive about securing lithium hydroxide at the same prices as the previous week.

Market dynamics are further illustrated by reports of South Korean battery producers attempting to sell excess lithium stock back to the spot market. This occurrence underscores the weakened demand for lithium in the East Asian market.

The pricing relationship between lithium hydroxide and lithium carbonate has also shifted, with hydroxide prices in East Asia being on par with those of carbonate. This is notable as hydroxide typically commands a premium over carbonate in this region. The impact of China's weaker domestic hydroxide market has influenced East Asian market prices, resulting in a decline in both hydroxide and carbonate prices.

Global Lithium Spot Prices Soften Amid Summer Slowdown

Beyond East Asia, global lithium spot prices have also experienced softening due to the customary summer slowdown in demand. In both Europe and the United States, prices for lithium carbonate and lithium hydroxide have seen a decline. This trend is attributed to reduced spot demand during the peak of the summer period.

The geopolitical landscape has also played a role in market dynamics. The availability of lithium hydroxide in Europe and the US has remained relatively tighter compared to Asia, owing to ongoing geopolitical tensions involving Russia, a significant exporter of refined lithium.

While some buyers continue to rely on longer-term contracts, spot offers have been limited in the market. Inquiries have primarily revolved around gauging price levels, while genuine buying interest remains subdued. This market sentiment reflects the summer lull in demand, which is more pronounced in the Western hemisphere than in Asia.

As the global lithium market navigates these dynamics, participants are closely monitoring market trends and consumer behavior to anticipate potential shifts in demand and pricing dynamics.

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