Lithium prices in China have fallen over 20% in the past two months, after demand for the key electric-vehicle battery ingredient has waned alongside sales of EVs.
The average spot price of lithium carbonate hit 392,500 yuan ($56,451) per ton on Friday, down 23.1% year-to-date and 31% from its record high in November, according to data from iFinD, a market intelligence provider.
As the electric car market boomed, ever increasing demand from battery- and EV-makers sent the price of the metal on an eye-watering rally, driving its value up around 10 times.
The lithium price is expected to fall further this year, said analysts and experts, as the industry faces a supply glut and EV sales growth slows after the government scaled back subsidies and incentives.
Analysts at brokerage China Securities Co. Ltd. estimated that there could be an annual lithium surplus of 18,000 tons, 185,300 tons and 179,500 tons, respectively from 2023 to 2025, while prices could fall to between 300,000 and 350,000 yuan per ton this year and drop to 200,000 yuan per ton in 2024.
Meanwhile, EV and hybrid passenger car sales in January plunged 45% from the previous month, according to data from the China Passenger Car Association (CPCA), an industry group.
Crackdown on illegal mining
The nearly two-year surge in lithium prices also attracted people eager for a quick profit to illegally mine, process and trade the metal.
Beijing has begun cracking down on illegal mining activity, recently sending a team to investigate the local industry in Yichun, a lithium-rich city in South China’s Jiangxi province, two sources with knowledge of the issue told Caixin.
On Friday the government of Yichun issued a statement vowing to crack down on illegal mining and trading of the rare earth.
The lithium processing facilities at mines in the city have had to suspend operations due to the investigation, the sources said.
The production suspension will not have a substantial impact on the lithium market in the short term because of the abundant inventory of local miners, some analysts said. But there could be a disruption in supply if the suspension in Yichun drags on.
In 2021, the city produced 120,000 tons of lithium carbonate, accounting for about 25% of China’s lithium output.
Major companies along the lithium supply chain have established plants in Yichun, such as miner Ganfeng Lithium Group Co. Ltd., battery-manufacturer Contemporary Amperex Technology Ltd., and EV-maker BYD Co. Ltd.
Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)
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