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Lithium price fluctuation may herald shuffles in lithium battery industry chain

After experiencing a high growth rate in 2022, the lithium battery industry chain was caught off guard in the beginning of 2023. The price of raw lithium carbonate has dropped from about RMB 520,000 yuan/ton at the beginning of the year to about RMB 260,000 yuan/ton at present, with the price halving within three months. In addition, lithium iron phosphate production capacity has expanded significantly in recent years, while terminal new energy vehicle consumption is facing a phased test, and factors such as the withdrawal of subsidies have slowed sales growth.

Lithium price fluctuation may herald shuffles in lithium battery industry chain
Lithium price fluctuation may herald shuffles in lithium battery industry chain

Experts at the China (Nanchang) Lithium Industry Conference 2023 held on March 28th, believed that in the face of the “cold” situation in the lithium battery industry chain, it may usher in a new round of reshuffle and reshaping, and the entire industry chain should strive to smooth the domestic cycle of the lithium battery industry.

Duan Debing, Vice-chairman and secretary-general of the China Nonferrous Metals Industry Association, said at the event that “In the past three years, we have experienced a sharp rise in the price of lithium salt from over RMB 40,000 yuan per ton in a short period of time to around RMB 600,000 yuan, and relevant enterprises have made a lot of money. Recently, we have seen lithium salt prices halve at a high level in a short period of time, causing industry anxiety due to the precipitous decline in lithium prices”.

Since the beginning of this year, under the influence of a number of factors, such as slowing down the growth of end-demand for new energy vehicles, discounts and promotions for fuel vehicles, and falling international oil prices, the price of lithium salt has been falling steadily, which has not only brought difficulties to raw material manufacturers, but also brought uncertainty to middle and downstream enterprises.

The sharp drop in the price of lithium carbonate is a major signal of the “cold” situation in the lithium battery industry chain. According to data from bulk commodity data service provider My Steel, as of March 29, the average spot price of battery grade lithium carbonate was RMB 264,000 yuan/ton, down about 49% from RMB 517,500 yuan/ton at the beginning of the year. In early November of last year, the spot price of lithium carbonate once exceeded RMB 600,000 yuan/ton, setting a record high.

The true reason for the dramatic rise and fall in lithium prices lies in the significant expansion of production capacity and inventory in the middle reaches of the early industrial chain, laying a sequela for the future market. Once the growth of terminal demand slows down, various links in the industrial chain scramble to clear inventory, leading to a periodic oversupply in the lithium market.

Since 2021, China’s new energy vehicles have continuously doubled in growth, stimulating the expansion of production capacity and accumulation of inventory in the middle reaches of the industrial chain. However, the growth of lithium resource supply is slow and significantly lagging, leading to a periodic supply shortage in the lithium market. As the growth rate of terminal demand significantly decreases, the industrial chain reversely cleans up inventory, exacerbating the oversupply of the lithium market

According to the experts attending the meeting, the periodic reshuffle of the current lithium battery industry chain is inevitable. However, after experiencing capacity adjustment and market restructuring, the entire lithium battery industry chain will move towards a new balance and breed new growth points.

With cost advantages, sodium batteries are expected to accelerate the development of transportation electrification, new energy power generation, and other fields, making the cake even larger. It is expected that by 2035, the demand for lithium batteries and lithium resources will increase by more than 7 times compared to 2022. The presence of sodium batteries in the market to participate in benign competition is also conducive to preventing the sharp rise and fall of lithium prices, which plays an important role in promoting the healthy and stable development of the lithium industry chain.

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