On September 11th, Fungible Society News (Reporter Zhou Xiaoya) a rumor sparked a strong rebound in lithium carbonate futures, which had been continuously falling.

At the close of today, lithium carbonate futures turned red across the board, with the main contract LC2411 closing up 7.91% at 78,450 yuan/ton, and several other contracts such as LC2412, LC2501, LC2502, and LC2505 also rose over 7%. The near-month contract LC2410 had a larger increase than the main contract, closing up 7.93%.

As the market soared, the open interest of lithium carbonate futures also increased significantly, with the overall open interest increasing from 29.9 thousand lots to 414.9 thousand lots, and the open interest of the main contract increased by 17.6 thousand lots. The lithium mining sector also strengthened, with Tianqi Lithium Corporation, Ganfeng Lithium, Yongsheng Lithium, and Willing New Energy all hitting the limit.

Behind the strong performance of both single stock futures and stocks, there is a rumor in the market today about the suspension of production at the Yichun lithium mine of Contemporary Amperex Technology. After the market closed, according to the Star Daily, Contemporary Amperex Technology responded to the Star Daily, saying that the company plans to adjust the production arrangement for Yichun lithium carbonate based on the recent lithium carbonate market conditions. With this news, will lithium carbonate open a rebound channel or will it be short-lived?

It surged nearly 8% in a single day.

As early as the morning session today, lithium carbonate futures and lithium mining sector stocks had already begun a strong rebound. On the closing of the morning session, the increase in lithium carbonate futures had fallen from over 7% to about 5%, but it strengthened again in the afternoon, closing with a nearly 8% increase. Since May, lithium carbonate futures have accumulated a cumulative decline of over 30%, falling to the threshold of 7 hundred thousand yuan at one point, so today's market performance is also particularly striking.

"Today, lithium carbonate futures and stocks both saw a sharp rise, mainly due to rumors circulating on the internet about the suspension of operations at Ningde lithium mine, which has strengthened the market's expectation of supply-side clearance and led to a short-term improvement in sentiment." Regarding this news, Liu Xianjie, an analyst at the Nonferrous Metals Analysis of Minmetals Futures Research Center, said that in the short term, it is necessary to continue to pay attention to the operation of the under-liming mine area and the corresponding lithium salt plants, and it can also be confirmed through the proportion of customer supply and other aspects.

According to Liu Xianjie, the rumored Nanning Contemporary Amperex Technology Mengxiawo project has an annual production capacity of 0.1 million tons of LCE. Research shows that the current actual monthly production is about 6,000 tons of LCE, accounting for about 8% of China's lithium carbonate supply. Due to its low original grade, the market generally regards it as one of the high-cost marginal production capacities.

"Therefore, even though the production stoppage news has not been confirmed, the emotional drive caused lithium carbonate prices to rise by more than 7% at one point." In his view, if there is indeed an unexpected reduction in production in the following project, the destocking of lithium carbonate in September and October may exceed expectations.

In the medium to long term, Liu Xianjie emphasized that the cessation of a single project is difficult to reverse the severe overcapacity situation.

Wu Jiang, senior analyst at Guotou Anxin Futures, believes that apart from the aforementioned rumors, the news of the suspension of the 0.22 million ton lithium mine project in Australia by Global Lithium has also led to a high opening of the lithium carbonate futures today.

"From the perspective of funds, the entry of large funds may be another reason for the sharp rise in lithium carbonate." Wu Jiang analyzed that as early as the last week of August, lithium carbonate futures showed abnormally high trading volume, with the weekly volume increasing by about 30% from millions of hands to 0.415 million hands, a 30% increase, reflecting a significant increase in disagreement between the long and short sides near 0.075 million.

"How is the real performance of September and October?"

From the current fundamentals perspective, many institutional professionals mentioned that under the traditional peak season of September and October, the recent fundamentals have improved. Lin Jiani, an analyst at Guangfa Futures, stated that recent spot transactions have improved, and downstream enterprises with rigid procurement demand have seen a slight increase in actual spot transaction prices.

"Lithium carbonate still maintains an overcapacity situation, but with prices falling below 0.08 million, the impact of low stock prices on supply and the incentive for demand cannot be ignored." Wu Jiang analyzed that downstream material factories are preparing for the traditional peak season of September and October, and production scheduling continues to increase. Spot trading behavior has slightly increased under the influence of upstream production scheduling, and there are still some differences in price expectations between the upstream and downstream sectors, which are currently in a price game.

Lin Jiani also believes that the degree of marginal improvement in the fundamentals is still weak, and it is more important to pay attention to whether there will be substantial joint production cuts in the upstream. Currently, the inflection point of inventory has appeared, and both upstream and downstream inventories have been digested, but the total inventory and warehouse receipts are still high.

Liu Xianjie analyzed from the demand side that the demand situation of downstream battery companies has improved, and the overseas supply has been reduced during the peak season. In an optimistic scenario, the weak supply and strong demand pattern may bring a domestic shortage of 0.01 million tons of lithium carbonate in September and October. In the first week of September, domestic lithium carbonate inventory was reported at 129,821 tons, a decrease of 1,483 tons (-1.1%) compared to the previous week, and has decreased for two consecutive weeks.

From the supply side, he mentioned that low-cost lithium brine lakes have a relatively stable operating rate, and lithium ore refining plants have a slight reduction in output due to cost inversion and individual plant maintenance within the month. The recycling end has reduced production due to the influence of raw material prices. In August, domestic lithium carbonate production was 0.0624 million tons, a decrease of 4.8% compared to the previous month.

Trend-based market trends still need to wait

Although the inflection point of inventory has appeared, the futures market for lithium carbonate is still affected by the financial situation, and the uncertainty of the fundamentals is also worth noting.

"The cost boundary of lithium carbonate is relatively complex. Since this year, it has been declining all the way, which does put some pressure on high-cost companies. However, it is difficult to discuss the bottom support position below with the absolute value of cost." Lin Jiani frankly said that in the short term, with the improvement of fundamentals and the current industry sentiment fermentation, there may be some support and upward repair in the market.

But she reminded that the height of the rebound depends more on the follow-up actions of the upstream, the demand in the fourth quarter is relatively weak, and it is not advisable to be overly optimistic about the height of the rebound.

"There is still a certain space for further rebound in the short-term lithium carbonate, and the key to maintaining the subsequent rebound lies in the quality of consumption in September and October." Wu Jiang believes that if the destocking is faster than expected, coupled with macro coordination, the possibility of lithium price rebound challenging 0.09 million yuan cannot be ruled out.

However, in the long term, he mentioned that the probability of the price of lithium carbonate futures reaching the bottom near 0.07 million is very small, and there is still room for further decline in lithium carbonate prices.

The main reason is that there is still profit margin on the mining side. As downstream smelting orders decrease, there is still competitive pressure to reduce prices on the mining side. In this situation, lithium prices will still go down to 60,000 yuan or even lower levels. He emphasized that the competitive supply pattern of lithium carbonate is difficult to reverse, and Chinese-funded companies, Australian mines, and South American salt lakes still need to lower prices to compete for limited smelting plant orders and downstream demand orders.

Liu Xianjie also stated that excessive optimism should not be placed on the rebound of lithium carbonate prices in the 'Golden September and Silver October' period. 'If the price rebounds too much, upstream companies may hedge future production capacity to lock in prices for the fourth quarter and even next year to avoid losses at the bottom of the cycle.'

In his opinion, the current rise in lithium carbonate prices is only a temporary rebound, not a turning point in the trend. Although the peak season provides support for lithium prices in the short term, factors such as supply elasticity and hedging demand can easily suppress the strength of price rebounds. If there is no further marginal reduction in the supply side, and inventory continues to accumulate after the peak season, lithium carbonate may return to a downward trend.