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Lithium markets at a ‘turning point’: Morgan Stanley

Alex Gluyas

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Morgan Stanley believes lithium markets have hit a turning point following a five-month sell-off that caused prices of the battery material in China to plunge 70 per cent.

The broker noted that China carbonate prices have bounced 30 per cent from their lows, and hydroxide prices have rebounded by 20 per cent. But while lithium chemicals are gaining, the spodumene concentrate price has continued its downward trajectory, now at $US4050 a tonne.

However, the broker noted sentiment in the market is improving given midstream inventories have fallen and actual supply growth has disappointed so far this year.

“The turning point in lithium markets? Yes, it looks like that for now at least,” said Marius van Straaten, commodities strategist at Morgan Stanley.

“Although China’s electric vehicle sales and battery production are back in growth mode after a lacklustre start of the year, cathode and battery cell producers are still not fully back buying in the spot market, but sentiment is clearly improving, and their lithium inventories appear to have eroded.”

Morgan Stanley said it expects the recently oversupplied lithium market to become tighter again for the remainder of 2023.

The broker sees upside risk to its second half base case forecast of an average China lithium carbonate price of $US25/kg.