In early February 2015, the battery-grade lithium carbonate market continued its upturn, driven by the growth of the alternative energy vehicle industry and the increase in price of lithium ore. CCM believes that the price still has the potential to increase further.
Chinese battery-grade lithium market continues its upturn
In early February 2015, the market continued in its upturn. As of January 2015, the price has been continuing to increase since June 2014, and has shown no signs of slowing down. The prices of low-end (USD 6,537/t) and high-end (USD6,700/t) battery-grade lithium carbonate have risen by 5.57% and 5.43% respectively since June 2014 alone.
One of the biggest causes of this increase in price and demand is the development of the Li-ion battery industry, which itself has been furthered by the rapid growth of the alternative energy vehicle industry. As well as this, the price of upstream lithium ore increased, which also caused the price of battery-grade lithium carbonate to increase. Specifically, the price of lithium concentrate from Oceania, a major supply region of lithium ore, increased by about USD50/t in November 2014, which was a 10% price increase from only one month earlier in October.
CCM's 2015 forecast of the Chinese battery-grade lithium carbonate market
Chinese market research firm CCM predicts that the price will continue to have a short term increase due to the following reasons:
- Industry experts believe the price of lithium ore and lithium concentrate will maintain their high prices, which as a result will force the price of battery-grade lithium carbonate to continue rising.
- In the coming months the supply of battery-grade lithium carbonate will decrease in volume due to the low seasonal temperatures. Manufacturers involved in the extraction of lithium carbonate from salt lakes in places such as Qinghai Province and Tibet Autonomous Region will decrease their output or cease production entirely during the low temperature seasons. This will reduce the supply as a whole, and cause a short term price increase.
- Downstream demand will continue to rapidly increase. On 28 January, 2015, the Ministry of Industry and Information Technology of the People's Republic of China (MIIT) held a press conference concerning the development of the telecommunications industry, in which the MIIT stated that both domestic and international governments are attaching great importance to the development of the alternative energy vehicle industry. Domestically in 2014, the accumulative output of alternative energy vehicles reached 83,900, up by about 4 times year on year. In addition to this, 723 charging stations and 28,000 charging piles were established throughout 2014.
What does the Chinese government think?
In 2015, the Chinese government have said that they will strengthen its support for the development of the alternative energy vehicle industry. At present, the Chinese government's national vehicle catalogues stipulate which vehicle types are eligible to receive a national subsidy. In addition to this, major cities have also published their own local vehicle catalogues which stipulate which vehicle types are eligible to receive a local subsidy. A put-on-record system has been proposed, which would allow for unlisted vehicle types to receive the subsidy if they pass the required government tests.
If domestically produced alternative energy vehicles are produced in line with the local subsidy polices are put on record successfully, they can be sold, registered for license plates and subsidized in local markets. This means that all domestically produced alternative energy vehicles filling the requirements will not be restrained by the vehicle catalogues and be subsidized. This will help to quicken the promotion of alternative energy vehicles throughout China. The government hopes that in 2015, the output will surpass 200,000, causing a large demand for battery-grade lithium carbonate.
What to take away from our lithium carbonate industry report?
On a short term basis, the Chinese battery-grade lithium carbonate industry is continuing its rapid development. With the global effort that is being put into this industry and the alternative energy vehicle industry, these short term developments could convert into positive changes in the long term. Currently, two leading companies, Sichuan Tianqi Lithium Industries Inc. and Jiangxi Ganfeng Lithium Co., Ltd. have claimed over 60% of the total sales in the domestic market, but with the regulations put forward by the MIIT, we could see more and more domestic companies enter into the industry.
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