February’s Lithium Carbonate Production Sees Sharp Decline Amid Seasonal and Market Challenges
In a notable shift within the domestic lithium market, lithium carbonate production experienced a significant downturn, with figures falling to approximately 32,000 tons in February. This marks a considerable month-on-month decrease of 22.9% from January's production of 42,000 tons, despite a year-on-year increase of 3.9%. The reduction in production comes amidst a combination of factors, including seasonal slowdowns and a subdued market atmosphere, raising anticipations of potential price fluctuations post-holiday period.
The decline in lithium carbonate production can be attributed to several intertwined factors. A notable decrease in mining and transportation efficiency during the winter months led some spodumene lithium salt companies to scale back or suspend their operations. Although some lithium salt companies saw an uptick in subcontracting orders and newly commissioned enterprises began ramping up, the overall production was dampened by the struggles of small and medium-sized companies. Many of these entities, particularly those relying on lithium mica purchases, continued to operate at a loss, prompting a reduction in their production outputs. Similarly, companies utilizing recycled materials opted to cut back or cease production due to ongoing financial strains.
The influence of the Spring Festival holidays and a concentrated maintenance period across most lithium salt enterprises are poised to further disrupt lithium carbonate production in February. The downturn in market conditions led to a preemptive reduction or cessation of production by numerous small and medium-sized lithium salt companies by mid to late January. This strategic move is expected to result in a marked reduction in domestic lithium carbonate production.
The gradual resumption of production post-Lantern Festival, particularly among factories undergoing maintenance, offers a glimpse of potential recovery. Nonetheless, the decision by several small and medium-sized lithium salt companies to restart operations will hinge on market dynamics, hinting at a possible temporary supply gap in late February. Additionally, a decrease in Chile's lithium carbonate exports to China in December could further constrain domestic supply in January, providing trading companies an opportunity to influence spot market premiums and discounts. Looking ahead to March, a gradual recovery in lithium salt production is anticipated, potentially stabilizing the market as lithium carbonate warehouse receipts begin to be cancelled, thereby replenishing supply sources.
