Supply Deficit of Lithium Likely to Re-Stage the Demand And Price Recovery

Singapore: China's battery raw material market has showcased a significant bounce back in the offered prices of the essential Lithium-based materials in the past couple of weeks. However, the transition of the month-on-month quotations has observed a significant dip as the pricing trend enters the last month of the second quarter. Since the Chinese authorities decided to ease the COVID restrictions, the public movement and market activities have grown reasonably across China. The blockade in the value chain was removed with a significant boost to the market activities. The Ministry of Industry and Information Technology (MIIT) informed that the automobile production across China has completely recovered in the last week after establishing the "Coordination Platform for the Supply and Industry Chain of Automobile" that minimizes the impact of the shutdown, as it is known that Tesla Gigafactory in Shanghai is reportedly back to the pre-shutdown level besides ramping to new production records.

As a ripple effect, the Lithium Carbonate pricing quotations offered by the manufacturers stabilized after observing a persistent fall for the past couple of months. The current developments in the downstream market have a consistent Lithium Carbonate supply against the improving demand. At the same time, the thin market transaction has been witnessed in the spot markets and ports in the past couple of weeks. In addition, the downstream LFP plants ramped up the restocking activities amidst the current situation of the domestic market, although the overall demand outlook is still sluggish.

According to the statement of the Chile Governor, the Chilean authorities were likely to promote a tax reform by the end of the second quarter, including the mining committee royalties bill. The Chilean Presidential Secretary-General Giorgio Jackson stated that the tax adjustments are the Chilean Government's top priority to fulfill the campaign promise. He added that the premium profits from the tax reforms would likely be spent on research and development projects. This will likely impact the offers for the Lithium raw materials across the regions.

As per ChemAnalyst, the global benchmark of the Lithium battery material is likely to witness significant gains in the upcoming period as most of the spodumene in China is imported from Chile. In addition, our analyst anticipated that with the ruling Left-wing Government in Chile, the authorities would likely avoid the historic mistake of privatizing the domestic resources again. Instead, the current Government is likely to be keen on a more self-reliant path to capitalize on the Lithium mines.