China’s lithium prices fall faster as supply beats expectations

BEIJING (Reuters) – Lithium prices in China fell more sharply this week, hitting a 26-month low, as a trial delivery of the metal to the Guangzhou Futures Exchange indicated larger-than-expected supply in the world’s top producer of the battery metal.

The most-traded January lithium futures contract on the exchange edged up 1% on Friday to end the week at 124,050 yuan ($17,202.65) per metric ton, down 10% on the week. They shed 7% last week.

It posted a 7% tumble on Thursday and now stands at less than half its price when the contract began trading in July.

That fall came a day after a test-run by the exchange for the new contract showed higher-than-expected availability of deliverable supply, analysts and traders said.

“The trial disappointed those who had bet on a shortage of deliverable goods when the contract matured, accelerating the price fall,” said Zhang Weixin, a lithium analyst at China Futures.

The plunge in the futures market dragged down spot lithium prices. Spot lithium carbonate assessed by Fastmarkets fell 11% this week to a 26-month low at 129,000 yuan per ton, its biggest weekly drop in seven months. Prices fell 4% last week.

Prices could fall to 100,000 yuan per ton by year-end with no expectation for a pick-up in demand, Zhang said.

Prices have tumbled dramatically from a peak close to 600,000 yuan last November, after China ended its national subsidies for electric vehicles.

The market has also been weighed down by rising domestic production of lithium carbonate amid lower raw material costs.

Prices of spodumenme, one of the main raw materials for the lithium chemical, fell to $1,590 per ton this week, down 80% this year and the lowest since August 2021.

China’s November output of lithium carbonate is expected to climb to 43,970 tons, up 9% from October and up 20% from last November, according to information provider Shanghai Metals Market (SMM).

Inventories readily available in the market stood at 63,296 tons in mid-November, according to SMM, up from 45,917 tons in October.

As supply growth outpaces demand, global lithium will register a 4% oversupply this year, said CITIC Futures, versus a deficit of 6% in 2021 and 2022.

($1 = 7.2111 Chinese yuan renminbi)

(Reporting by Siyi Liu and Dominique Patton; editing by Jason Neely)