According to the Commodity Market Analysis System of Shengyi Society, the price of lithium carbonate has been falling at a high level recently. As of February 9th, the benchmark price of Shengyi Society’s battery grade lithium carbonate was 136000 yuan/ton, a decrease of 6.21% compared to the same period last week (February 2nd), a decrease of 2.86% month on month, and an increase of 71.7% year-on-year.

Supply side: Expectations of loose imports continue to rise
As the Spring Festival approaches, some lithium salt factories are scheduled for maintenance or holidays, resulting in an expected month on month decrease of 16.4% to 82000 tons of domestic lithium carbonate production in February. However, Sigma lithium mine in Brazil resumed production ahead of schedule, and lithium salt exports in Chile increased by 44.82% to 16950 tons in January, causing concerns in the market about short-term supply pressure. Although the increase in such supply is mostly in the form of pulse shipments and not a trend change, it still further suppresses prices in the fragile market sentiment. At the same time, domestic lithium salt factories have abundant raw material inventory, and their willingness to stock up in the long term has increased. Although traders have a strong willingness to raise prices, the market has formed a consensus on the expectation of oversupply, further exacerbating downward pressure on prices.
Demand side: Short term seasonal contraction
During the Spring Festival holiday, the downstream market of lithium carbonate entered the traditional off-season for consumption, and demand showed a phased contraction trend. The production schedule of downstream positive electrode material enterprises has been affected by holiday shutdowns and equipment maintenance, with a month on month decline of 10-15%. Among them, the operating rate of ternary materials has significantly decreased, while lithium iron phosphate has benefited from the support of energy storage demand and remained relatively stable, but the production schedule of top enterprises in February still decreased by 17% month on month. At the same time, downstream enterprises have basically completed pre holiday stocking, and downstream inventory has sharply increased in the past two weeks. Most enterprises have covered the demand in February, and some have even stocked up in advance until early March. The replenishment behavior in the past two days has basically ended, and procurement demand has slowed down significantly in the short term, with only a small amount of essential replenishment, which is difficult to form effective support for prices. In addition, the periodic replenishment that occurs when prices fall sharply (such as the replenishment of about 10000 tons on the day of the limit down on February 5th) is mostly a short-term behavior of downstream bargain hunting, rather than a trend driven demand recovery, and cannot change the pattern of weak short-term demand.
The turbulence in the futures market intensifies, and panic accelerates the downward trend of prices
The sharp drop in futures prices has triggered panic in the spot market, causing traders to completely break their price mentality and significantly increase their willingness to ship. In order to avoid the risk of further price declines, some traders have chosen to sell their inventory at low prices, further lowering spot prices; However, downstream enterprises take advantage of the opportunity of price decline to delay procurement, exacerbating the supply-demand imbalance in the spot market. The excessive focus of funds on short-term supply growth and weak demand has further strengthened bearish sentiment, leading to price declines that exceed the actual fundamentals. Panic selling has become an important force driving down prices.
According to the data analyst of Business Society’s lithium carbonate, multiple factors are resonating to cause a decline in lithium carbonate. As the Spring Festival holiday approaches, downstream demand will continue to be in the off-season, and the recovery of futures market sentiment will take time. Lithium carbonate prices still face certain downward pressure, but in the long run, the long-term growth certainty of the downstream new energy industry is strong, and the demand for lithium carbonate will steadily increase.