Lithium carbonate prices expected to swing lower
----Interview with Jingye Chen
Vice General Manager
Hunan Zhongde New Material Technology Co., Ltd.
- Hunan Zhongde New Material Technology Co., Ltd. is located in Daping Development Zone, Xinshao County, Shaoyang City, covering an area of 63.7 acres. The company specializes in the production and sales of battery-grade lithium carbonate, with a total investment of 120 million yuan. It has an annual production capacity of 8,000t of battery-grade lithium carbonate, with an annual output value exceeding 1.5 billion yuan. The company promotes the development of new materials industry through high-tech and high-quality services.
- Asian Metal: Thank you for accepting the interview with Asian Metal. Please briefly introduce your company's basic situation.
- Mr. Chen: Hunan Zhongde New Material Technology Co., Ltd., established in 2012, focuses on the production and sales of lithium carbonate. Our latest production capacity reached 8,000t, and has not only won the honors of national high-tech enterprises and national-level key special new enterprise, but also has more than 40 authorized patents. In 2022, the company successfully produced and sold about 5,000t of lithium carbonate, achieving sales revenue of over 1.3 billion yuan; in 2023, despite changes in the market environment, the company still maintained a production and sales volume of about 5,000t of lithium carbonate, with sales revenue reaching over 900 million yuan; in the first half of 2024, the company continued to operate steadily, producing and selling about 3,000t of lithium carbonate, with sales revenue exceeding 300 million yuan.
- Asian Metal: What are the advantages of your company's waste recycling process compared with ore processing?
- Mr. Chen: Our company has unique patented technology in waste recycling, one of which is to significantly improve the lithium recovery rate through microwave pre-treatment, thereby further reducing the comprehensive cost.
- Asian Metal: From the end of March 2024, lithium carbonate prices continued to decline. In your opinion, what is the main reason?
- Mr. Chen: Firstly, in March, all manufacturers basically resumed normal production, and production capacity was effectively released. Secondly, as the end of March approached, downstream industries completed the concentrated replenishment of the peak season. However, after the concentrated consumption of the terminal market before and after the Spring Festival, the consumption momentum weakened at the end of March, which led to some pressure on lithium carbonate prices.
- Asian Metal: As we all know, your company has been deeply involved in the lithium carbonate industry for more than 10 years. Could you share how your company responds to the rapid decline in lithium carbonate prices in June? What are the strategies to stabilize prices and profits?
- Mr. Chen: Faced with the rapid decline in lithium carbonate prices, we indeed faced considerable challenges. In the past, we could only passively respond to this situation, such as reducing orders, reducing output, or trying to reduce procurement prices of raw material to maintain costs. However, in recent years, we realized that a single response strategy could no longer meet the changing market demands. Therefore, we have adopted a series of diversified strategies to stabilize prices and profits. First, we have strengthened cooperation with upstream and downstream enterprises to jointly respond to market fluctuations by establishing long-term stable cooperative relationships. Second, we increased research and development investment, improved the added value and competitiveness of products, and offset to a certain extent the downward pressure on prices. In addition, we also pay attention to optimizing production processes, reducing production costs, improving production efficiency to maintain product competitiveness.
- Asian Metal: In the current market environment, do you think it is a good time to buy lithium carbonate? Why? Where do you think the bottom of lithium carbonate prices is?
- Mr. Chen: I think the current lithium carbonate prices are significantly affected by capital sentiment. In fact, from the perspective of industry operations, most production companies are already on the verge of breaking even. From the perspective of production costs, I think the current price of around RMB80,000/t (USD11,210/t) is already close to the bottom, so it is a good time to consider buying in batches. However, the market is affected by multiple factors, especially the profit-seeking behavior and herd effect of capital, which increases the uncertainty of price fluctuations. We predict that the bottom of lithium carbonate prices would be around RMB75,000/t(USD10,510/t).
- Asian Metal: How do you view the current supply and demand situation of lithium carbonate in China?
- Mr. Chen: Currently, there is an imbalance between supply and demand in the Chinese lithium carbonate market, with a significant surplus of supply and ample inventory. Furthermore, lithium salt supplies exceed demand by at least 20,000s per month. Despite the steady growth in sales of EV in China, the primary driver of this growth comes from the popularity of hybrid models, which have a reduced battery capacity compared to pure electric models. Therefore, despite an overall increase in market sales, there is not a simultaneous expansion in direct demand for lithium carbonate and, in some cases, the demand growth is diluted. However, the market has a powerful self-regulating ability. If lithium salt prices continue to decline, numerous producers would face severe cost pressures and may have to reduce or even stop production, resulting in a decrease in supply. Additionally, as market price signals gradually release and disseminate, and with the continual growth of the EV market, particularly in pure electric models demand, we have ample reason to believe that the market would gradually return to a healthy and stable supply-demand balance after an adjustment period.
- Asian Metal: How do you think the lithium carbonate market would trend in the next two years? What is your outlook on the demand for EV market in the next five years?
- Mr. Chen: Starting in March 2024, impacted by both excessive supply and lower-than-expected demand, lithium carbonate prices continued to decline from around RMB120,000/t (USD16,815/t) to the current level of approximately RMB80,000/t (USD11,210/t). Given the ongoing oversupply of lithium salt, I predict that in the second half of this year, lithium carbonate prices would fluctuate within a range of RMB75,000-110,000/t (USD10,510-15,414/t). If prices remain weak, we anticipate that some producers would decrease production or even halt production due to financial pressures by 2025, which could lead to a slight rebound in prices to a range of RMB100,000-140,000/t (USD14,013-19,618/t). By 2026, with economic recovery and growing consumer enthusiasm for EV, lithium carbonate prices may reach a range of RMB120,000-160,000/t (USD16,815-22,420/t). Looking to the future, as the lithium carbonate market matures, we expect the prices to gradually stabilize. In the next five years, the EV market is destined to usher in sustained and rapid growth. The domestic market would continue to maintain a high-speed growth momentum, while the international market would also accelerate growth in parallel. The future development prospects of new energy are broad, and the future is promising.
- Asian Metal: Thank you for your wonderful sharing and wish your company a prosperous business.
- Mr. Chen: Thank you.
