Lithium Salt Prices: When will Roller-Coaster Ride End? When...

Lithium Salt Prices: When will Roller-Coaster Ride End? When will Demand Pick Up?

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SHANGHAI, Apr 6 (SMM) - At present, the overall demand and prices of the lithium industry are going down, and the responses of each company vary. Traders that are standing on the sidelines will be more concerned about the rebound of lithium carbonate prices and the timing of downstream demand recovery. This article aims to answer the questions for various companies and traders like: Is there currently a reduction in overall production? Do lithium salt plants have profits? What is the proportion of losses? Will the demand of downstream car companies experience explosive growth in the second half of the year?
Lithium carbonate costs of various enterprises
While the actual cost of each enterprise is different, the industrial average cost is lowered by the companies extracting lithium from salt lake brine. The profits of companies producing lepidolite and integrated with lithium carbonate capacities are relatively high, and the profits of those producing spodumene are even higher. SMM data for Q1 2023 showed that

1. The cost of battery-grade lithium carbonate produced from salt lake brine was 40,000-50,000 yuan/mt (including the purification cost from industrial-grade lithium carbonate carbon to battery-grade lithium carbonate);
2. The production capacity of lithium carbonate produced by using self-produced raw spodumene was about 10,000-20,000 mt of LCE, and the cost was nearly 60,000 yuan/mt;
3. The production capacity of lithium salt produced by self-produced lepidolite was 50,000-60,000 mt, corresponding to an average cost of 60,000-80,000 mt/mt;
4. The production cost of lithium carbonate for enterprises purchasing lepidolite concentrate stood at around 200,000-250,000 yuan/mt. But as the price of raw ore went down, the cost also dropped The operating production capacity is about 50,000-60,000 mt of LCE;
5. The production capacity of lithium carbonate using purchased spodumene concentrate is the highest and currently stands at some 100,000-130,000 mt. The cost is roughly between 300,000-320,000 yuan/mt based on the current price of spodumene concentrate. The decline in ore prices also drove down the lithium carbonate cost. Yet, the decline in ore prices in the first quarter was significantly lower than that of lithium carbonate. SMM statistics of the companies purchasing spodumene concentrate include the leading lithium salt factories with equity in overseas mines, which resulted in lower settlement price of spodumene concentrate and the production cost than the market average price.

Will the price of lithium carbonate fall to the break-even point of mainstream companies?
Lithium carbonate prices can hardly fall to the break-even point of mainstream companies as the cost will support prices in the long run. Basically, except for the enterprises that purchase spodumene concentrates and lepidolite concentrates, the production costs of other enterprises having their own resources are relatively low.
According to SMM data, on April 4, 2023, the prices of battery-grade lithium carbonate in China plummeted by 57% compared with the end of 2022, spodumene concentrate prices fell by 25%, phosphoperidite prices fell by 38%, and lepidolite concentrate prices plunged by 57%. At present, it is estimated that 25% to 30% of the domestic production capacity is in significant losses. This part of the loss-making capacity is mainly owned by lithium salt enterprises that purchase spodumene concentrate and lepidolite concentrate. Most of their raw materials are high-priced stocks. They would incur losses even as they produce with spot ore considering the production cycle and sales prices. Most of the loss-making enterprises using purchased lepidolite concentrate are located in Jiangxi, and those using purchased spodumene concentrate are mostly in Jiangxi and Sichuan.
Output cuts and halts by loss-making enterprises to directly impact cost support
There have been a few small lithium salt factories in China suspending production and large lithium salt factories cutting output, but the reduced production was relatively low compared with the current inventory of lithium salt factories. In 2023, the overall supply is expected to remain in excess. SMM currently expects an excess of about 30,000 mt of LCE. In 2022, lithium carbonate inventories fell 20,000-30,000 mt.
However, the lithium salt inventories of most CAM factories are currently at an extremely low level. After the market demand gradually picks up, the inventory of lithium salt factories can be quickly digested.
SMM understood that downstream buying interest has been low with low acceptable prices even as the costs of traders are high. While sellers are expected to lower spodumene concentrate prices, the price drop can be much smaller than those of lithium salt.
Will prices continue to fall in the future?
In the absence of significant improvement in demand, supply has continued to grow. This is the main reason for the rapid decline in prices.
1. The main reason attributable to the current poor demand is that the production of new energy vehicle companies surged in the fourth quarter of last year, and the price cuts of fuel-powered vehicles will constrain the growth of new energy vehicles to a certain extent in the short term. Despite a growth in the overall sales, NEV inventories accumulated from January to February.
2. After the price of lithium carbonate fell, delivery taking of battery by automakers will slow down to varying degrees. Delivery taking and purchases of CAM by battery factories as well as those of lithium salt by CAM plants will be deferred to reduce safe inventories. The market pessimism has magnified the decline in current demand in all links.
3. The silver lining is that the demand for the new energy vehicle industry typically improves significantly in the third and fourth quarter. Energy storage demand is expected to maintain a relatively high growth rate. Therefore, in anticipation of lithium carbonate stabilising due to cost support, the demand should gradually pick up. And the delivery taking of batteries by end-users will also gradually resume.