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Why Lithium prices have skyrocketed?

2022/03/16


A Lithium Mine in Sichauan Province


The new energy vehicle (NEV) and energy storage sectors burst in terms of market demand since Q4 2020, resulting in palpable growth of demand for raw materials in the lithium battery industry chain. Lithium carbonate, as one of the key raw materials for lithium ion battery, is also greatly affected by the booming demand in these emerging markets. China’s demand for lithium carbonate reached 350,000 mt in 2021, up 60% YoY, according to SMM research.

 

On the other hand, lithium salt output growth is restricted by the long production cycle of the upstream mining end. In the scenario of steady growth and booming demand, the prices of lithium carbonate and lithium hydroxide move all the way up. As of February 2022, the average price of battery-grade and industrial-grade lithium carbonate rose from 62,000 yuan/mt and 59,000 yuan/mt respectively at the beginning of 2021 to 403,000 yuan/mt and 389,000 yuan/mt, recording an immense growth of 544% and 552% respectively during this period.

 

For lithium carbonate, as the indispensable raw material for the four major cathode active materials (CAMs), the rising prices of lithium carbonate have shored up the costs of CAMs as well, subsequently lifting the prices of finished products.

 

the lithium prices have skyrocketed with the mismatch of demand and supply. And the proportion of lithium salt in the total costs of CAMs as of this February has grown palpably from the beginning of 2021, and even recorded a gain of nearly 10% from December 2021. As such, the capital usage efficiency has been quite low, which makes it more difficult for some medium and small-sized companies to survive.

 

Lithium salt prices have grown to a high of 450,000 yuan/mt as of mid-February 2022, and keep rising by nearly 10,000 yuan per day. On the supply side, some lithium carbonate companies have resumed the production from the Chinese New Year holiday, and the supply is likely to pick up slightly. The demand, on the other hand, is estimated to drop 6% in February. Nonetheless, the demand from the four major CAMs is still at a high level, hence the prices of lithium carbonate are expected to rise further.


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