TRADE REVIEW: Asian lithium may rebound in Q1 on post-holiday demand, turnarounds

This report is part of the S&P Global Commodity Insights' Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, cobalt, lithium, nickel and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts to new arbitrages, and to quality spread fluctuations.

The Asian lithium market is expected to drift ahead of the Lunar New Year holidays in end-January due to limited restocking, while post-holiday demand recovery and tight supply from refinery maintenance may drive a short-term rebound in the first quarter of 2025, market participants said.

However, some sources remain cautious about the sustainability of a longer-term recovery, citing underlying weak demand that is expected to remain throughout 2025.

Lithium carbonate prices rangebound in Q4

Chinese lithium carbonate prices continued to closely track the movements of the Guangzhou Futures Exchange contracts in the fourth quarter. Spot prices were at parity with futures contract levels during periods of tight supply but fell to a discount when spot supply was abundant. Prices of domestic lithium carbonate fluctuated between Yuan 70,500-83,000/mt ($9,800-$11,550/mt) throughout the quarter.

Lithium chemicals prices started to decline in Q4 as demand slowed down, following a traditionally bullish season in Q3. However, as prices bottomed out, demand from downstream buyers picked up as they started restocking.

Platts-assessed lithium carbonate prices peaked at Yuan 83,000/mt on Nov. 13 before retreating, and by the end of Q4, prices hovered around Yuan 75,000/mt in the traditional year-end lull, S&P Global Commodity Insights data showed.

Restocking activities and refineries' maintenance plans have provided slight support moving into the new year.

Platts assessed lithium carbonate on a DDP China basis at Yuan 76,200/mt Jan. 13, up 0.9% from Oct. 1, while lithium hydroxide fell 3.5% to Yuan 70,000/mt over the same period, Commodity Insights data showed.

Refiners shift away from lithium hydroxide production

Lithium hydroxide was trading at a discount of Yuan 3,000/mt to lithium carbonate in early October, but the discount widened to over Yuan 10,000/mt by mid-November, data from Commodity Insights showed, amid a shrinking market share of nickel-manganese-cobalt (NMC) batteries, the main consumer of lithium hydroxide.

NMC battery production stood at 73.7 GWh through Q4, occupying a market share of 20.7%, down 3.9% from the previous quarter, while LFP battery had a market share of 79.1%, rising 3.9% on the quarter, according to China's Automotive Power Battery Industry Innovation Alliance.

Since lithium carbonate can be used in the production of both NMC and LFP batteries, many lithium converters are shifting their production capacity to focus solely on lithium carbonate, including converting lithium hydroxide production lines to lithium carbonate. As a result, the supply of lithium hydroxide tightened as the year-end approached, driving hydroxide prices higher and narrowing the price gap between the two chemistries.

Demand weak for seaborne lithium

In the seaborne market, spot liquidity for lithium in South Korea and Japan remained low throughout Q4, as these markets are primarily covered by term contracts.

With the uncertainties surrounding the US's upcoming policy decisions, particularly regarding the Inflation Reduction Act, market participants said they were taking a wait-and-see approach, which adds to the market uncertainty.

Imports of lithium chemicals into South Korea dropped significantly in Q4 due to high battery inventory levels and a weak international electric vehicle market. South Korean customs data showed that the country's lithium hydroxide import from September to November 2024 fell 16.2% year over year.

In 2024, Chile's lithium exports increased 20.3% year over year to 262,653 mt, driven by higher demand from China. However, exports to Japan and South Korea decreased due to weaker demand coming from these two countries. Despite the rise in export volumes, the overall export value declined due to lower prices.

Platts assessed the battery-grade lithium hydroxide quarterly average price down 16.2% from Q3 at $9,360/mt CIF North Asia Q4 2024, while battery-grade lithium carbonate on a CIF North Asia basis was assessed at $10,000/mt Jan. 13, with battery-grade lithium hydroxide at $9,600/mt, Commodity Insights data showed.

"Lithium hydroxide and lithium carbonate are trading close to parity, and I also expect a significant upward trend for lithium hydroxide in Q1, compared to carbonate," said a South Korean consumer.

According to market participants, lithium hydroxide prices have increased slightly as producers maintain their pricing, but demand remains weak driven by urgent purchases limiting the potential for a significant price growth.

Spodumene prices rise in Q4

Upstream, spodumene, the primary feedstock of lithium chemicals, saw slight price increases in Q4 due to expanding refining capacities.

In December, heightened overseas spodumene feedstock demand due to new lithium refinery projects in China boosting production saw spodumene prices to trend upward.

However, persistent negative profit margins for lithium refiners, despite more miners announcing production cuts in Q4, limited the rise in prices.

In Q4, Pilbaras Ngungaju plant and Mineral Resources' Bald Hill mine was placed on care and maintenance, and Liontown's laid plans to defer and cut production at Kathleen Valley mine.

Platts assessed spodumene concentrate with 6% lithium oxide content up 10% from Oct. 1 at $825/mt FOB Australia Jan. 13, while spodumene concentrate with 5.5% lithium oxide content was assessed at $790/mt CIF China, Commodity Insights data showed.

Platts assessed spodumene concentrate with a 0.1% differential to 6% lithium oxide content at $13.75/mt FOB Australia Jan. 13. The value per 0.1% lithium oxide is considered linear in spodumene concentrate containing lithium oxide within the range of 5.5%-6%.

Global lithium supply is expected to remain in surplus by 20,000 mt lithium carbonate equivalent in 2025, according to Alice Yu, lead analyst at SPGCI's Metals and Mining Research Team.

Consistent lithium output from Australia, Mali, Argentina and China may continue to weigh on spodumene prices in Q1.