Lithium price slides on supply and demand concerns

A new type of Lithium-ion battery and the end of Chinese support for the Electric Vehicle (EV) industry could weaken global demand for Lithium. At the same time 8.5 million tons of lithium, equivalent to 10% of the current world reserve, were recently found in a deposit in Iran. The price of Lithium Carbonate, the essential raw material, halved in anticipation of lower demand and increased supply.

For more detailed market commentary go to StoneX Market Intelligence, https://my.stonex.com/.

The overproduction of batteries at the end of 2022 to take advantage of subsidies drove battery producers to have unsustainably high inventories and prompted the sale of goods at a steep discount with sharp capacity cuts at manufacturers in all streams of the supply chain.

Lithium Carbonate Price, Chinese Yuan Per Ton

Source: Trading Economics

Cheaper Lithium-ion battery

The world’s largest Lithium-ion battery producer, China’s Contemporary Amperex Technology (CATL), a leading Chinese battery manufacturer, recently announced that it plans to start mass production and delivery of a new type of Lithium-ion battery, ‘M3P’, which could be cheaper that traditional nickel and cobalt containing batteries, while offering 15% higher energy density than today’s ‘LPF’ Lithium-ion phosphate batteries (which have over the last several years eaten into nickel and cobalt containing battery market share).

M3P batteries will replace the iron component of an LFP battery with a mix of zinc, aluminum and manganese. CATL have arguably moved towards this new battery chemistry and away from solid-state batteries citing it has found it challenging to come up with a technologically feasible and competitive product based on solid-state batteries (given the increased usage of lithium as a raw material).

If M3P offers a cheaper alternative than batteries which contain nickel/cobalt, and higher performance than LFP batteries at modestly higher price, they could offer an attractive market proposition. There will of course be a necessary lead-time to build manufacturing capacity, supply chain, and to prove OEM manufacturers’ acceptance.

Competing Sodium-ion batteries

Another longer-term challenge for lithium demand could emerge from greater use of competing Sodium-ion batteries in Electrical Vehicles (EVs). Last month, Chinese automaker JAC unveiled a test version of its Sehol E10X EV car using sodium-ion cells. However, Lithium-ion batteries are pretty much the only batteries that power EV's at this stage.

EV vehicle demand still strong

China halted incentives for the EV auto sector last year, hitting battery demand. Battery producers were left with large inventories such that they cut capacity and sold product at a discount. However, lithium-ion batteries are still dominant in light EV passenger vehicles where sales are forecasts to remain strong (33% up in 2023, but slowing from 66$ in 2022 and over 100% in 2021.)

Light Passenger EV Sales Forecast, 2023

Source: StoneX.

Analysis by Natalie Scott-Gray, Senior Base Metals Analyst.

Read more of Natalie’s thoughts at StoneX Market Intelligence at https://my.stonex.com/

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.