Aggressive Destocking Practices in China Accelerates the Drop in Lithium Carbonate Offers

Singapore: Over the past few weeks, Lithium Carbonate quotes in the Chinese domestic market have observed a consistent drop, affected by the imminent removal of New Energy Vehicle (NEV) subsidies. At the same time, demand at terminals from the Northeast Asian markets has plunged drastically amidst the traditional destocking practices coupled with restricting the cash outflow ahead of the year-end, especially in South Korea. As a ripple effect, temporary changes over the downstream trading pattern impacted the raw material demand across the value chain.

As per a major Lithium Carbonate market player, several Lithium salt smelters and traders are keen to destock and dump their goods before the year-end, hindering the supply-demand order of Lithium Carbonate in the Chinese domestic market. At the same time, a significant portion of Lithium smelters anticipated that the offers would further plunge and thus sold aggressively as compared to other downstream derivatives. In contrast, they kept the negotiation channel open despite Lithium Carbonate being a prominent trading commodity. Whereas the inquiries from the far east Asian market have dropped, the new fresh inquiries demanding wider leverages over the quotations of Lithium Carbonate. Although most of the market players prioritized long-term contractual deliveries, others were not in a rush amidst the completion of annual targets.

The revocation of NEV subsidies has a considerable impact across the active cathode materials. The downstream EV battery producers have become highly cautious about new inquiries for Lithium Carbonate, as the inventory levels were sufficient to support the operation in the next few quarters. In response, it deterred the enthusiasm amongst the market players to participate in the spot markets. The consistently dropping EV sales in the Chinese domestic market have clouded the market with great uncertainties ahead of the Lunar New Year Holidays.

As per the ChemAnalyst pricing intelligence, the offers for Lithium Carbonate in the Chinese domestic market remain persistent on a downward trajectory, and a considerable margin has been curtailed for active participation. Although, the current ongoing trend will be short-lived as the market closure amidst the Lunar New Year Holidays will bottle-necked the supplies, and the Lithium Carbonate market might likely observe a sustainable rebound by the mid of the first quarter of 2023.