TRADE REVIEW: Asian lithium demand to slow in Q4 on seasonal lull; prices to be rangebound

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.

Lithium demand in Asia is expected to slow down moving into the fourth quarter post Golden September and Silver October -- the traditional peak months for the Chinese market -- on the back of continued pressure from ample supply, while prices are likely to be rangebound at Yuan 70,000-80,000/mt ($9,897-$11,310/mt) in the near term.

Prices reach multi-year low

Chinese lithium carbonate prices ranged between Yuan 70,500/mt and Yuan 90,000/mt throughout Q3. Consumers had adopted a wait-and-see approach due to fluctuating lithium futures contract prices, which drained spot liquidity from the market. Prices eventually fell to a multi-year low of Yuan 70,500/mt Aug. 15, prompted by a significant decline in lithium futures at the Guangzhou Futures Exchange.

Market participants said they expected prices to remain rangebound in Q4 amid weak fundamentals, adding a rebound was unlikely and there would be no significant improvement in downstream demand.

Platts, part of S&P Global Commodity Insights, assessed lithium carbonate on a DDP China basis at Yuan 75,500/mt Sept. 30, down 13% from July 1, while lithium hydroxide fell 6% to Yuan 72,500/mt over the same period.

Term contract negotiations for the new year are also expected to take place in Q4, but the demand outlook for 2025 remains unclear.

“The outlook for China’s PEV industry remains uncertain,” said Alice Yu, lead analyst at Commodity Insights. “Lithium demand and PEV sales are unlikely to sustain growth momentum in the near term, given consumer affordability challenges and a slowdown in rolling out more affordable vehicle models.”

Production cuts, Chinese stimulus

The Asian lithium industry began to slow down output plans in the latter half of Q3 amid waning prices and thinning margins. A key development that emerged during this time was China's largest battery-maker Contemporary Amperex Technology reportedly scaling back on its mining operations in Jiangxi province.

However, increases in lithium chemical prices due to production cuts and suspensions were capped as the market remained cautious amid a supply surplus that has persisted to date. The highest price leap as a result came when Platts battery-grade lithium carbonate was assessed up Yuan 4,000/mt in a day at Yuan 75,000/mt Sept. 11.

Prices continued to fluctuate between Yuan 74,000/mt and Yuan 75,500/mt until the end of Q3, supported largely by China’s monetary stimulus on Sept. 24 that raised expectations of a surge in consumption.

Platts last assessed lithium carbonate at Yuan 71,000/mt and lithium hydroxide at Yuan 65,800/mt Oct. 18, both on DDP China basis, Commodity insights data showed.

Seaborne volumes diminish

Seaborne spot trades, especially to South Korea and Japan, saw muted liquidity throughout Q3 due to overall sluggish demand from the electric vehicles sector.

Platts assessed battery-grade lithium carbonate on a CIF North Asia basis at $10,400/mt Sept. 30, with battery-grade lithium hydroxide at $10,200/mt, down 18% and 20%, respectively, from the start of the quarter, Commodity Insights data showed.

Consumers in the seaborne market also said that if additional material was required, they would more likely increase term contract volumes with existing suppliers rather than source material from the spot market due to relatively favorable prices.

South Korea’s lithium oxide, hydroxide and carbonate imports were down 14.61% month on month and 39.89% year over year at 9,354.45 mt in August, while Japan also saw a slight year-over-year growth of 0.38% to 3,494.49 mt, but volumes were down 23.18% month over month.

Japanese demand for battery-grade lithium carbonate, however, is expected to rise next year with more lithium battery production plans being announced in Q3 alongside subsidies totaling approximately Yen 1 trillion ($6.69 billion) from Japan’s Ministry of Economy, Trade and Industry for 12 approved projects.

The shift from high-nickel batteries towards mid-nickel batteries and lithium-iron-phosphate batteries, which use lithium carbonate, had also led lithium carbonate higher. This meant lithium carbonate traded at a premium over lithium hydroxide throughout Q3 in the seaborne market.

Platts last assessed lithium carbonate and lithium hydroxide at $10,000/mt and $9,500/mt, respectively, Oct. 18, both on CIF North Asia basis.

Spodumene prices see downward pressure

In Q3, spot spodumene prices were pressured further downward, and levels fell to $720/mt Aug. 29, the lowest for the quarter amid weak downstream demand. Prices inched back up to $750/mt amid news of scale-backs of projects by miners like Global Lithium and Arcadium in September.

Spot enquiries, however, had increased in Q3 as lithium carbonate futures prices on the GFE observed a stronger contango. This came amid news of potential production cuts and expectations of improved supply-demand balance after China announced economic stimulus measures.

The higher futures prices had prompted market participants to take positions on the GFE and secure spodumene at the then “low” prices.

Platts last assessed spodumene concentrate with 5.5% lithium oxide content at $700/mt CIF China Oct. 18, down $5/mt on the day, and 6% lithium oxide content at $750/mt FOB Australia. The spodumene concentrate 0.1% differential to 6% lithium oxide content was at $12.50/mt FOB Australia Oct. 18, Commodity Insights data showed. The value per 0.1% lithium oxide was deemed linear in spodumene concentrate containing lithium oxide within the range of 5.5%-6%.

Import tariffs on Chinese EVs

China’s electric vehicle exports rose 0.9% month over month and 15.6% year over year to 111,000 units in September, according to China Association of Automobile Manufacturers (CAAM), despite concerns over higher import duties imposed on them in the US and EU.

China announced new trade-in subsidies July 31 to stimulate consumer spending and develop its EV industry. But market participants are unsure whether the new policy would be able to support and sustain the anticipated Chinese EV growth as Chinese consumer confidence remains weak despite stimulus measures.