China’s Dominance in Lithium Carbonate Market at Risk as Demand Subdued

Lithium Carbonate, a crucial raw material for manufacturing Electric Vehicles (EV) batteries and other electronics, is losing its market value in China amid a blurry demand outlook in the Asian market. The price realization tumbled by nearly 46% from its all-time high in November 2022, leading to the downfall in the market prices of other Lithium salts used in the automotive and electronics industries. In February 2023, China imported 9,438 tonnes of Lithium Carbonate, a 20% decrease month-over-month. In comparison to the previous month, imports of Lithium Carbonate from Argentina and Chile both decreased by 27% and 20%, respectively.

According to the market participants, a few small-scale Lithium Carbonate companies have been forced to shut down owing to crashing market prices of the commodity, some of which went bankrupt. Evergrande’s EV unit in China has warned to shut down its electric car manufacturing process, which could alter the supply dynamics of Lithium Carbonate and other Lithium-based salts like Lithium Hydroxide and Lithium Hexafluorophosphate in the country.

The demand outlook for Lithium Carbonate has remained subdued in the Chinese market, and this slump can be explained by the much less optimistic mood for EVs in China, with the phasing out of a more than decade-long subsidy program for EV purchases and unusually lengthy New Year celebrations, this year eroding new car sales in January 2023.

The China Passenger Car Association (CPCA) confirmed that sales of New-Energy Vehicles (NEV), which include battery EVs and plug-in hybrids, decreased in January 2023 by 6.3% after experiencing phenomenal growth from the previous year. Furthermore, according to the market players, EV sales in China will remain subdued throughout 2023 due to the prevailing bearish sentiments of the Lithium market, especially Lithium Carbonate and Lithium Hydroxide.

About 60% of the Lithium processing in the world is already under Chinese control. To ramp up its dominance, it is currently exploring new territories. According to the International Energy Agency (IEA), China is exploring new borders, like Nigeria, to expand its dominance in the Lithium market, especially Lithium Carbonate and Lithium Hydroxide. Kaduna is one of several Nigerian countries with Lithium deposits. At least seven other countries are verified to have the mineral in marketable amounts.

Looking forward to China’s ramped-up efforts to secure Lithium, its ambitions to control one-third of the global Lithium by 2025 seem debatable.