Lithium Price Analysis: China Futures Rise Amid Weak Spot Demand

According to Mysteel’s May 29 newsletter, the GFEX top traded lithium carbonate contract has gone up 1.97% to 178,860 yuan, and the battery grade lithium carbonate index has decreased 0.71% to 175,550 yuan.

Breadth of the market also indicated mixed signals, however. The price of lithium carbonate rose by 1.14% to 177,500 yuan per tonne on Trading Economics, while Investing.com data indicated that China’s spot lithium carbonate price fell 1.96% to 75,000.

Futures Recover as Spot Prices Lag

Lithium carbonate futures closed higher after traders reacted to a tightening feedstock situation and renewed hopes for near-term prices. Mysteel said GFEX’s most-traded lithium carbonate contract settled at 178,860 yuan, up by 1.97% on the day.

Data from Trading Economics also indicated prices for lithium carbonate have increased by 2,000 yuan, or 1.14%, to 177,500 yuan per tonne. The one-year chart continues to paint a picture of a robust recovery from last year’s prices, but the price has now slowed from the recent record highs around 200,000 yuan.

The spot market, however, did not follow the futures higher. Mysteel’s price of battery-grade lithium carbonate dropped 0.71% to 175,550 yuan. Investing.com’s China spot benchmark was likewise weak, falling 1.96% to 75,000 for lithium carbonate 99.5% minimum.

This difference indicates a possible level of supply support in futures markets that is not reflected in the physical market. There is still not enough demand downstream to cause a wide spot rebound.

Supply Signals Support Sentiment

The market recovered its capital at lower prices earlier this year,” Mysteel told the publication. Early investors’ profit motive was followed by renewed buying interest as the supply-side factors associated with feedstock tightness took over.

Futures for lithium carbonate closed up for Mysteel, following news of a postponed resumption at its Jianxiawo mine. The update was good for sentiment as market participants considered whether supply recovery could be slower than anticipated.

The market discussion was also opened by Zimbabwe’s government, which announced that 14 minerals, including lithium, nickel, cobalt, and graphite, are critical. The declaration establishes a compulsory minimum state interest via a special purpose vehicle.

The action comes in the wake of broader resource control activity in the critical minerals sector. The addition of another policy layer over global supply expectations for lithium comes on top of other factors, such as the increasing importance of governments to have tighter control of battery raw materials.

Buyers Stay Selective Before June

Downstream buyers were not in a hurry to build inventories, Mysteel said. Trading volumes were low over the day, but prices were improving during the session. That suggests that it’s not a matter of aggressive restocking but selection.

Nevertheless, the demand side is not nonexistent. Several LFP cathode plants are still increasing new capacity, suggesting increased production volumes could be seen in June. This may help drive lithium carbonate demand if battery material production is as anticipated.

China’s push to invest in the power grid also provides a long-term demand backdrop. The National Development and Reform Commission unveiled a 15th Five-Year Plan project that will invest over 5 trillion yuan in extending and modernizing the grid.

More resilience in the grid, which relates to both energy storage expansion and integration of renewables, is related to battery demand.

For the time being, lithium is used in a mix daily. Futures are looking good at around 178,000 yuan, but it is only with more buyer interest in the spot market that the recovery is becoming more well-rounded.