Lithium Price Analysis: Spot Weakens While Futures Hint at Recovery

The mixed performance underscores the differences of opinion between the physical market and the traders looking for higher demand from there on.

Physical Demand and Futures Sentiment

On June 29, the market for lithium provided conflicting signals, with some futures trading optimism and some weakness in the physical market. Spot prices for battery-grade lithium carbonate eased 0.46% to around $19,696 per tonne, continuing a downward trend that has seen prices fall for much of June.

A spot chart for one month shows that sellers have been in control since prices temporarily rose above $22,000 earlier this month. There have been subsequent sales after each bounce, resulting in the market going to fresh lows in several weeks. The current price drop puts spot prices just above the psychologically important $19,500 level, which may serve as key support if selling pressure persists.

Notably, the most actively traded lithium carbonate futures contract closed 3.34% up at 153,920 yuan a tonne. The change was due to the market trading in backwardation for two trading sessions and then moving back into contango, where futures prices are higher than spot prices.

This shift in structure generally indicates price expectations that are not necessarily good signs of physical strength. It doesn’t mean the prices will be higher for the future, but it does indicate that participants are giving more weight to future supply conditions than to today’s market prices.

Technical Indicators Point to Improving Momentum

Meanwhile, the TradingView chart monitoring lithium-associated stocks rallied quickly following last week’s sell-off, gaining back towards the 297 level. The indicators of momentum had gains in the recovery.

As per the technical chart, the MACD is rolling over from its negative trend, and the histogram is shifting to the positive side of the chart, suggesting that buying momentum has returned after a few sessions of weakness. Meanwhile, the RSI has risen to approximately 68, signaling that it’s nearing an overbought level but still shows higher buying pressure than it did during the early part of the week.

Regardless, the price action looks like it’s not developed enough to form a clear uptrend. The recovery came off a huge drop from over 310 points, so the market still hasn’t reached recent highs.

As of yet, lithium does not look like it has reached a true reversal point but rather a transitional phase. Spot prices remain underpinned by tepid demand in the physical markets, with futures traders gearing up for improved conditions in the future. It will be determined by whether those expectations become spot prices over the next few weeks, depending on how battery demand, stocks, and discipline in production by these key battery suppliers evolve and develop.