Due to oversupply and continuous insufficient demand, the price of lithium carbonate has been falling steadily in the recent period.

After yesterday's sharp drop of 1.59%, today (July 18th), lithium carbonate futures once again went down. The main contract LC2407 was reported at 0.08795 million yuan/ton, with a minimum intraday drop of 0.08645 million yuan/ton, reaching a new low for the year. It has fallen by more than 23% in the past three months. On the spot side, according to the data from Shanghai Nonferrous Network, the average price of battery-grade lithium carbonate today is 0.08645 million yuan/ton, a decrease of 900 yuan/ton from the previous day. The industrial-grade lithium carbonate is reported at 0.0815 million yuan/ton, which is not far from the industry's supply and demand balance cost line of 0.08 million yuan/ton.

It is reported that some lithium mica companies that purchase material from other sources have stopped work, and the lithium mica leader Zhisun Lithium has announced at the end of June that two wholly-owned subsidiaries, Jiangxi Jinhuili Industry Co., Ltd. and Tian Zhuo New Material Co., Ltd., have stopped production for maintenance. In the secondary market, lithium extraction from salt lakes and lithium battery concepts have also experienced significant pullbacks and have all plummeted by nearly 50% since December 2021. There is a significant difference in the performance of mining companies in the first half of the year.

The decrease in lithium prices directly affects the performance of lithium mining companies. From the 2024 first-half performance forecast disclosed by several companies in recent period, it is not difficult to see that the downward trend in lithium prices has not only significantly weakened the profit-making ability of upstream mining companies, but also caused some companies to expect losses due to poor prices. Meanwhile, some companies unexpectedly reported profits due to their resource endowment and cost advantages. As of July 15th incomplete statistics showed that 13 listed lithium companies have released their first-half 2024 performance forecasts, among which 5 suffered losses, 3 had a predicted increase, and 5 had anticipated decreases. Among them, the largest predicted loss came from Tianqi Lithium Corporation, with a predicted loss of 4.88 to 5.53 billion yuan in the first half of the year, while the company had a profit of 6.452 billion yuan in the same period last year. The company stated that the main reason for the poor performance was due to a significant drop in sales prices of lithium products and a substantial decline in gross profit of lithium products. Ganfeng Lithium predicted a loss of 0.76 to 1.25 billion yuan in the first half of the year, compared with a profit of 5.85 billion yuan in the same period last year. The company explained that despite the year-on-year increase in product shipments, a continuous drop in lithium prices has left the company in a loss-making situation.

Among the top lithium mining companies, Tibet Mineral Development achieved positive growth in the first half of the year with estimated net profit attributable to parent company at 90 million yuan to 0.13 billion yuan, representing a year-on-year growth of 255.78% to 413.91%. However, the growth mainly depended on the increase in the price of chromium metal. Overall, the lithium carbonate market is still in a state of supply-demand imbalance, with market pessimism prevailing and lack of upward momentum.

According to Guotai Junan Futures, in the second quarter, the main contract of lithium carbonate prices showed a trend of "shock-fall." Fundamentally, lithium carbonate maintaining the pattern of oversupply, the supply will increase, and short-term prices may continue to fluctuate at a low level. In the second half of the year, the supply side is expected to remain high, while the demand side is expected to purchase mainly on actual needs. Short-term or there may be a mismatch between supply and demand, with the overall trend of lithium carbonate prices expected to decline.

As of external factors, the increase in sanctions on Chinese products such as batteries and new energy vehicles by foreign countries continues to increase. Following the US imposing tariffs on Chinese electric vehicles and lithium batteries, the European Commission has decided to impose temporary anti-subsidy duties on imported electric vehicles from China after a 9-month anti-subsidy investigation on Chinese electric vehicles.

Looking forward to the second half of the year, Huatai Futures predicts that under the condition of no significant changes in global supply and demand, the lithium carbonate market will continue the process of oscillation and bottoming, during which the price may be influenced by short-term news, but difficult to change the overall trend.

According to English industry publication "Industrial Minerals", cartel conduct investigation of Chinese lithium supplier Ganfeng Lithium by US Customs is leading the authorities to investigate an alleged smuggling of more than 8,000 tonnes of lithium from mainland China to the USA. By 1 July, US Customs had seized two shipments of withe fine powder, which testing showed contained between 39% and 52% lithium. Smuggling penalties in the US can be up to five times the value of the smuggled goods.

Among them, Tianqi Lithium Corporation is expected to have the largest loss, with expected losses of 4.88 billion yuan to 5.53 billion yuan in the first half of the year, while the company made a profit of 6.452 billion yuan in the same period in 2023. Regarding the expected loss of performance, the company stated that it was mainly due to a significant decrease in lithium product sales prices compared to the same period last year and a significant decline in lithium product gross profit.

Ganfeng Lithium is expected to lose 760 million yuan to 1.25 billion yuan in the first half of the year, while it made a profit of 5.85 billion yuan in the same period last year. Ganfeng Lithium explained that although product shipments have increased year-on-year, the continued decline in lithium prices has forced the company to face a situation of losses.

Jiangxi province's large lithium compound production and operation company, Ganfeng Lithium, announced its sales for the first half of the year, reporting 23,480 tonnes of lithium compound sold, up 67.88% year-on-year, reaching 70.43% of the company's annual sales target. The company also indicated that its business was positively impacted by growing global demand for new energy vehicles, adding that it remained optimistic about the long-term development of new energy vehicles and the lithium industry.

China's stock market downturn, consumer sentiment weakened, and macro-economic uncertainty have led the automotive industry into a downtrend. Tesla and other foreign-funded enterprises active in China's new energy market, sales have seen negative growth, and the sales volume of domestic new energy vehicles since this year has fallen sharply. Since the beginning of this year, the growth rate of the new energy market has slowed and the demand for lithium by the new energy industry has been sluggish.

In terms of supply and demand, the lithium carbonate market is still in a state of imbalance. At present, upstream lithium salt factories are quite strong in their intention to raise prices, while downstream companies are still cautious in procurement, further expanding the psychological price difference between upstream and downstream. In June, China's demand market performed well, but as the auto market enters the off-season in July, the demand for power battery cells may be limited due to high dealer inventories. With external factors, the environment will continuously reduce the production of China's batteries, new energy vehicles and other products. The US's sanctions directly hit China's high-tech industry, semiconductor industry, new energy vehicles, and smart phones. The sanctions against China will continue to grow, which puts pressure on China's high-tech industry and limits its ability to compete in international markets.

On the external front, the external environment's sanctions against Chinese batteries, new energy vehicles, and other products continue to increase. After the United States imposed tariffs on Chinese electric cars and lithium batteries, the European Commission conducted a nine-month anti-subsidy investigation against Chinese electric vehicles before deciding to impose provisional anti-subsidy duties on imported electric vehicles from China.

Due to the downturn in the lithium market and the uncertain macroeconomic environment, the mining industry performance showed significant differentiation in the first half of the year.

The supply and demand of lithium carbonate remained imbalanced in the second quarter. At the same time, the supply-side expansion has intensified, and short-term prices will fluctuate at a low level. In the second half of the year, the supply side is expected to remain high while the demand side is expected to be conservative in procurement. Short-term there may be a mismatch between supply and demand, with the overall trend of lithium carbonate prices expected to decline.

Looking forward to the second half of the year, Huawei Futures predicts that under the condition of no significant changes in global supply and demand, the lithium carbonate market will continue the process of oscillation and bottoming, during which the price may be influenced by short-term news, but difficult to change the overall trend.