China's newly launched lithium carbonate futures prices on the Guangzhou Futures Exchange (GFEX) fell sharply on the first trading day, echoing a downtrend in the spot market caused by a slowdown in demand from battery consumers.
The most-traded January 2024 contracts closed at 215,100 yuan/t ($30,000/t) on 21 July, down by 13pc from the exchange's launch price of Yn246,000/t. Trading volumes totalled 59,519 lots on the first trading day, corresponding to 59,519t according to the exchange's trading rules for this contract.
The dominant contracts are for delivery in January, when the lithium carbonate market typically enters its off season. Supplies have been also rising following a series of investments in lithium production in the past few years, driven by a rapidly evolving electric vehicle (EV) industry. These may have led to downbeat sentiment over the outlook for early next year among participants on the platform, according to market participants.
Argus forecasts that global lithium output capacity will rise above 1.3mn t/yr lithium carbonate equivalent (LCE) by 2024 from less than 1mn t/yr LCE in 2022. The increase is largely because of mine expansions such as at SQM's Atacama in Chile; Albemarle's La Negra III and IV projects in Chile; Albemarle and Mineral Resources' Wodgina mine in Australia; and Australia's Greenbushes mine — owned by Albemarle and a joint venture between IGO and Tianqi Lithium. These additional supplies will ease supply tightness and press down lithium prices to a lower level in 2023 from a ceiling in 2022, market participants told Argus.
Argus-assessed spot prices for 99.5pc grade lithium carbonate fell to Yn280,000-295,000/t ex-works on 21 July from Yn290,000-305,000/t ex-works on 18 July. Suppliers have lowered their offer prices in the past few days to attract orders given low market activity with consumers making purchases as needed.
Fluctuations in lithium feedstock prices in the past few years have raised concerns about the impact on the uptake of EVs, with market participants calling for hedging tools to stabilise the market and manage operating costs. The GFEX on 14 June released a draft for public comment its plan to launch lithium carbonate contracts and options and announced on 17 July that it would launch them on 21 July.
Domestic lithium producers including Zhicun Lithium, Jiangxi Jiuling, Yongxing New Energy, Yinli New Energy and Chengxin Lithium are the first batch of GFEX's designated producers for deliveries.
