LONDON, Aug. 21, 2019 /PRNewswire/ -- Lithium prices have steadily declined since the end of Q1, finally crashing through the $10/kg LCE mark at the end of July. Weaker-than-expected demand in China is partly responsible, but the main driver has been the ongoing avalanche of new supply into the market, as plentiful cheap spodumene meets ample conversional capacity in China.
Many market players continue to forecast long-run prices for lithium in the mid-teens LCE, citing refinery bottlenecks and the potential for ramp-up delays in the mining and refining sector. Based on previous experience in other commodities, CRU finds this argument unconvincing. We continue to forecast that lithium prices will be governed by cost fundamentals and that this will result in sustained lithium prices in the single-figures – the same message which we have continually conveyed to CRU clients since November 2017.
Lithium prices tumble as disappointing demand growth meets ample supply
Lithium carbonate prices in China have dropped by nearly 20% since the beginning of 2019 to RMB 65,000/t, equivalent to $9.25/kg LCE. Lithium hydroxide has fallen by 30% to RMB 74,500/t, according to CRU's price assessments. China is the world's largest user of lithium, accounting for 57% of global demand in 2019, and is also the biggest supplier of lithium converted products. Many market players look to Chinese lithium spot prices as a bellwether of market health and therefore the continued decline of lithium prices in China has put mounting pressure on the global lithium market.
Subdued demand drags China's lithium market
CRU calculates that the Li-ion battery sector accounts for 60% of lithium demand in China, of which EV and portable electronics have the largest share. Portable electronics have long been the mainstay of lithium demand – but with 4G handsets now representing 95% of domestic sales, market saturation has resulted in mobile phone sales through to July dropping by 5% year-to-date.
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