Strong Momentum in China Basic Lithium Salt Market in 2021
From 2017 to 2021, China’s basic lithium salt market showed large ups and downs. From 2017 to 2019, the market showed a downtrend overall, causing low profit margins and slow rises in supply. In recent years, the demand rapidly improved while the supply growth was slow, resulting in unbalanced supply and demand. Accordingly, market prices bottomed out. In 2021, basic lithium salt market prices kept growing. Taking battery-grade carbonate lithium as an example, its market prices in East China from January to October totally rose by 254%, and those in the whole year are predicted to rise by 180% Y-O-Y.
1. Supply: The basic lithium salt output in 2021 is predicted to rise by as high as 53% Y-O-Y.
In 2021, the capacity of basic lithium salt rose slowly, and the growth rate is predicted to be only 4.5% in China. By comparison, the output is expected to rise by as high as 53% Y-O-Y amid firm downstream demand driven by the strong momentum of new energy vehicles and energy storage battery industries. The capacity utilization rate is predicted to rise by 13.2% Y-O-Y. From January to October 2021, China’s basic lithium salt output and operating rate fluctuated upward. Thereinto, the output was the lowest in February, mainly affected by the Spring Festival holiday. Afterwards, producers gradually raised their operating rates for the delivery of long-termed contracts. In mid-2021, the release of newly added capacity further helped lift the overall output. In September, the output inched down, 0% 10% 20% 30% 40% 50% 0 100 200 300 400 500 2017 2018 2019 2020 2021E kt Lithium hydroxide Lithium carbonate Operating rate (right axis) 2 / 3 intl.sci99.com taking cues from reductions in the operating rate at regional producers. In October, the output contracted, mainly dragged by that via extraction of lithium from brine in Northwest China.
2. Import: The carbonate lithium import volume in 2021 hit a new high, and it is predicted to rise by 59% YO-Y.
From 2017 to 2021, China’s carbonate lithium import volume was in an uptrend overall. From 2017 to 2019, the import volume ranged from 20kt to 40kt. On the one hand, China’s domestic demand growth was slow. On the other hand, the newly added capacity was released intensively. As a result, the rigid demand for imports was not strong. From 2020, the import volume hiked notably. First, the end industry quickened its development pace, indicating rapidly rising demand for basis lithium salt. Second, the newly added capacity was limited, as declines in market prices sharply squeezed the profit margins of producers in previous years. Third, foreign carbonate lithium cargoes had notable price advantages. In 2021, the import volume further rose, and is estimated to enjoy an increase of 59% Y-O-Y. Carbonate lithium prices kept growing in China amid limited spot availability. By comparison, foreign prices rose slowly, resulting in certain arbitrage space.
3. Demand: Downstream consumption volume in 2021 will be double that in 2020.
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