China lithium oversupply estimated at 9 kt in Mar

Despite the traditional seasonal high, China's lithium carbonate spot prices have been soft entering March primarily due to supply growth outpacing the demand, Mysteel's survey showed. 

In March, China's lithium carbonate production is estimated at 78,400 tonnes based on Mysteel's new sample library of 68 lithium refineries or 83 production bases, which is 22.5% higher than February, according to Mysteel's data. 

The production growth is contributed by the smooth resumption of CATL affiliated refineries, as well as some others resuming the production from overhaul. The refineries with in-house mines will keep the operating rates at a high level, while the hydrometallurgical plants have also received more orders. 

From the perspective of raw materials, the lithium carbonate production from spodumene will create a new historical high in March. Specially, the top-tier refineries will maintain the production at full capacity thanks to sufficient raw material stocks. But some tollers are likely to scale back the production on overly high lithium ore prices and lacking the opportunity to open new hedging positions.

 

The lithium carbonate production from lepidolite is likely to remain flat with a few refineries keeping the production at a low level for soft lithium prices. The production from brine lakes is estimated to be flat. 

 

In addition, Chile's lithium carbonate exports to China stood at 12,040 tonnes in February, down 37.0% month on month and 25.0% year on year, based on data from the Chile customs. 

Against the rising production, the LFP production scheduling has shown a monthly increase of 14.11% at 266,900 tonnes in March, thanks to robust orders for energy storage-related products. 

Source: Mysteel 

In line with Mysteel's estimate in early February, China's lithium carbonate market is likely to see a palpable growth in both supply and demand in March. And the survey indicates a supply surplus of around 8,948 tonnes, putting pressure on lithium carbonate futures prices.

 

 

Mysteel's tracking on lithium carbonate inventory has suggested a similar trend. That is, the marketable lithium carbonate inventory (the lithium carbonate stocks held by the refineries and traders that are willing to sell) has been accumulating for several weeks in a row, with a new high observed last week. The major cause is that the downstream players have been purchasing directly from the refineries on oversupply, prompting the traders to more willing to ramp up the sales. 

Nevertheless, the daily spot transactions have been weakening continuously in the past few weeks, which is unlikely to rebound in the near term on rising proportion of long-term orders in total lithium carbonate supply. 

In summary, China's lithium carbonate market is estimated to remain soft through March on oversupply. The market players are advised to watch the production scheduling of CATL affiliated refineries as well as the lithium ore price volatility. In addition, the GFEX LC warrant is also a key factor influencing the lithium price.