Lithium price volatility

Lithium price volatility



Lithium ion batteries are one of the most widely used battery types in the current electric vehicle market. Lithium, nickel, and cobalt are important metals in lithium battery cathode materials, which directly determine the energy density, safety, and cost of the battery. Therefore, lithium is known as the "white oil" of the era of automotive electrification.



As the main raw material for new energy vehicle power batteries, nickel cobalt lithium has rapidly increased in demand with the rapid development of the electric vehicle industry, and has attracted high attention from countries around the world to nickel cobalt lithium resources. "Chen Xuesen, member of the Standing Committee of the Party Committee and Vice President of the China Nonferrous Metals Industry Association, told Outlook Oriental Weekly.



The significant fluctuations in the prices of metal materials for new energy batteries have had a negative impact on the development of both upstream and downstream industries. For example, the significant decline in lithium prices at the beginning of this year has also caused difficulties for domestic upstream high-cost mine development and raw material production enterprises, and even some upstream enterprises have suffered losses, affecting investment enthusiasm. Chen Xuesen pointed out that the external dependence of nickel, cobalt, and lithium minerals accounts for 93%, 98%, and 63% of China's consumption, respectively, The supply of raw materials is highly dependent on imports. At the same time, the distribution of overseas resources is too concentrated, with cobalt resources being highly concentrated in the Democratic Republic of Congo, and nickel and lithium resources heavily dependent on Indonesia and South America. In addition, China currently faces the problem of imperfect recycling systems and standards in ensuring the safety and stability of the nickel cobalt lithium industry chain supply chain.



Chen Xuesen analyzed that due to the long development and construction cycle of mineral resources, mine construction is far behind the speed of upstream and downstream smelting, processing, and battery industry construction, especially the super rapid development of power batteries and electric vehicle industries in various regions, leading to serious mismatches in the development speed of upstream and downstream industries, and a phased shortage of supply and demand. In addition, a leading lithium resource enterprise in a foreign country has adopted a small batch spot bidding auction trading method for lithium products, which has intensified concerns among market parties about upstream raw material supply and contributed to the rise in lithium raw material prices. In this context, the lithium market price in 2022 showed a sustained and irrational surge trend. In mid November, the price of battery grade lithium carbonate once exceeded a historical high of 600000 yuan/ton, doubling from the beginning of the year. However, the market trading volume significantly shrank, and downstream purchasing willingness significantly decreased. With the gradual release of new production capacity and increased supply, lithium prices have gradually declined. As of June 30, 2023, the price of battery grade lithium carbonate has dropped to around 300000 yuan/ton.



In response to the sharp short-term price fluctuations of nickel, cobalt, and lithium since 2022, the government, industry, enterprises, and associations have worked together to ensure supply and stable prices. Firstly, continue to improve the level of domestic resource supply and stabilize the basic domestic supply situation. According to statistics, in 2022, the total output of lithium salts produced by utilizing domestic salt lake lithium resources, lithium mica, spodumene, and recycling lithium containing waste reached 284000 tons of lithium carbonate equivalent, an increase of 77.5% compared to 2021, and the external dependence of lithium resources decreased by nearly 10 percentage points. Secondly, Chinese enterprises have achieved good results in obtaining nickel cobalt lithium resources and developing them through "going global". In response to the short-term sharp fluctuations in prices, domestic backbone enterprises have flexibly adjusted their business strategies, strengthened risk management, and fundamentally suppressed excessive speculation and speculation through the rational use of futures tools. At the same time, the China Nonferrous Metals Industry Association has spoken out through various channels, advocating for ensuring supply and stable prices, and has also achieved good results.

 
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