The fall of lithium continues to worry the market

The fall of lithium continues to worry the market
The fall of lithium continues to worry the market

Lithium carbonate spot prices in China fell to the lowest level since August 2021. And so far this month, commodity futures lost 12% in value. The recent bearish behavior follows a sharp 80% collapse in 2023.

Although quotes stabilized at the beginning of 2024, the supply chain is still working to clear inventories, while customers postpone purchases. The bearish sentiment was also impacting very negatively on the share prices of producersas Albemarle and Piedmont Lithium.

According Susan Zouan analyst at research firm Rystad Energy, rising lithium production and expectations of a pause are putting pressure on stocks.

The specialist indicated that, despite the slight rebound at the beginning of the year caused by lower supply during the Lunar New Year holidays in China and speculative purchases, bullish factors on lithium “mostly disappeared”.

Notably, electric car makers struggling with slowing demand growth for these products have been cutting orders for lithium, anticipating they could soon replenish their inventory at even lower prices.

Anyway, some traders see limited decline in the metal. In fact, futures contracts for July are the cheapest traded, suggesting there will be a bottom during the Chinese summer.

In this context, Citigroup detailed that total lithium carbonate inventories in China increased since April. Stocks of other downstream players, such as cathode makers, rose 8% in the third week of June compared to the second, while those of other users soared 32%.

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