Is Broken Supply Chain Responsible for Plunge in Lithium Prices?

Singapore: In recent terms, the quotations of Lithium and its derivatives products, which showcased tremendous gains in the producer's offers from the past couple of years, have dropped sharply. The average prices for the Lithium Carbonate battery-grade plunged by USD 298 per tonne, although currently, the quotations were fluctuating within a rangebound, and prices are stable. According to the industry insiders, the complete supply chain has been impacted under the influence of the COVID 19 situation in China. Several automobile manufacturers halted the production, and demand plunged tremendously as the shelf life for the critical downstream Lithium Hexafluorophosphate is somewhere between 6-8 months. The slower operations at the ports have delayed the deliveries of the essential key auto parts, worsening the situation in the Chinese domestic market.

The China CNIA vice president represented the enterprises and stated that 60% of China's Lithium ores are currently imported from overseas. The main reason the prices soared unprecedentedly in the last year is the advantage of the infrastructural capabilities of China to manufacture the Lithium commodities against the robust market demand that sought the attention of the market players and supported the prices. In contrast, the demand rose significantly against the rough supply chain network. He added that "we hope to increase the investment in developing the new technologies to ensure the abundant supplies of Lithium in future."  

The downstream purchasing intentions were running extremely low, and the overall Lithium market was in a state of decline, which instigated the dull transactions at the spot market. The reduction in the purchasing intentions caused by the shutdown of the end-use industries' production facilities levied its impact on the complete value chain. Whereas the performance of the Lithium Carbonate in the first quarter was exceptional due to the uncertainty amid the Lunar New Year holidays lined up with Winter Olympics in China supported the producer quotations in the Chinese domestic market. In addition, the broken-out conflict between Russia and Ukraine further clouded the market sentiments after the western nations implemented sanctions on Russia and the market players were hesitant to procure the Russian cargoes from the black sea. Therefore, due to the rupture value chain in China and the limited availability in the European market, the western players were keener on the Asian market as the prices were downward.

As per ChemAnalyst, the pandemic situation in China is complex, and the logistical and transportation activities were not operating at the optimum efficacy, leading to delays and disruptions in the supply chain. Whereas the operating rates at the downstream facilities have plunged below the 50%, and the overall atmosphere is bearish will likely persist in the Chinese domestic market in the upcoming period.