Spodumene market rises following GFEX rally on production cut reports
Multiple sources told Fastmarkets that a lepidolite and lithium producer has suspended their lepidolite production.
Lepidolite, which can be refined into battery grade lithium salts, is often considered a swing source of production within the lithium industry.
The most active 2411 (November) lithium carbonate futures contract on GFEX closed at 78,450 yuan ($10,815) per tonne on Wednesday, up by 5,550 yuan per tonne, or 7.61%, from the day’s opening price of 72,900 yuan per tonne.
The lithium carbonate futures price surge on GFEX attracted market participants to hedge lithium carbonate prices amid the price uptrend, multiple sources said, and prompted a rise in activity and prices for spodumene.
“We were approached by multiple buyers of spodumene following the surge on GFEX. The market is very active,” a Chinese trader said.
Fastmarkets’ daily assessment of the spodumene min 6% Li2O, spot price, cif China was $720-770 per tonne on Wednesday, up from $700-750 per tonne on Tuesday.
“Spodumene prices are closely linked to lithium carbonate prices. And spodumene prices are rising today [Wednesday], with both offers from the sellers and bids from the buyers lifted by the GFEX surge,” a Chinese market participant said.
Buyers were looking to acquire spodumene for lithium carbonate production and to sell forward lithium carbonate contracts on GFEX to arbitrage, sources said.
Spodumene prices rose briefly after the result of a spodumene auction on 28 August, but otherwise prices have been steadily declining since May, driven by oversupply and bearish sentiment.
Persistent oversupply
China’s lithium prices have been on a general downtrend throughout 2024 due to weak demand and oversupply.
Some sources expect 5,000-6,000 tonnes per month of lithium carbonate supply to be lost if the production suspension is confirmed, which would ease the oversupply. But with market inventories around 130,000 tonnes, according to a trader, the impact is not enough to reverse oversupply, said Chandler Wu, Fastmarkets senior analyst for battery raw materials.
“We think the halt of production would change the periodic degree of oversupply rather than oversupply itself,” Wu said.
“As we mentioned in the Fastmarkets Tracker last week, pressure on Chinese producers was likely to grow after the forward curve on GFEX prices flattened. It appears too much forward selling has flattened the curve, and without the ability to sell forward, taking advantage of the contango to cover the cost of carry until the hedges become prompt may force producers to rein in production,” he added.
Despite the rise in spodumene prices today, battery grade lithium carbonate and lithium hydroxide CIF prices for China, Japan and Korea remained unchanged.
Fastmarkets’ daily price assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea was $9.20-11.00 per kg on Wednesday.
And Fastmarkets’ daily price assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was stable at $9.80-11.50 per kg on Wednesday.
“It could take months to see a reaction in prices. We need more companies to cut production,” a European trader said.
US-based lithium producer Albemarle is said to be holding an auction for spodumene concentrate on Friday September 13, according to sources. Market participants will play close attention to what the result of the auction will be amid the surge on the GFEX, Fastmarkets heard.
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