Rare discounts offered by Chinese battery giant CATL to automakers have accelerated a plunge in lithium prices, and the market is set to drop a further 25 per cent with supply growth outpacing demand.
BEIJING/MELBOURNE — Rare discounts offered by Chinese battery giant CATL to automakers have accelerated a plunge in lithium prices, and the market is set to drop a further 25 per cent with supply growth outpacing demand, analysts and traders say.
The slide steepened, analysts say, as investors were spooked by a drop in China's January electric vehicles sales and by CATL's discount terms, which included an assumption that prices of lithium carbonate, a key component in auto batteries, would more than halve. Given growing supply, Goldman Sachs sees spot prices of lithium carbonate, a precursor to the compound used in making lithium-ion batteries, sinking to $36,000 a ton in the next 12 months, from an average of $55,000 this year.
"While we remain positive on the long-term outlook for lithium, the short-term outlook is less clear, with a clear acceleration in China EV sales needed to allay market fears," Barrenjoey analysts said in a research note on Feb. 17. However Allkem's chief sales and marketing officer, Christian Barbier, said the price slide in China"needed to happen" and was"helpful," and said it was exacerbated by the country's battery makers jostling for market share."So that's why we're not too concerned about the overall fundamentals and the future direction of prices," Barbier said.
They are likely to drop below 300,000 yuan by the end of this year, about half the level they peaked at in November 2022, said four China-based analysts and five traders, buyers and producers.
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