Chinese lithium carbonate premiums narrow as hydroxide price rises accelerate

Lithium carbonate’s premium over lithium hydroxide in the Chinese domestic market, seen in the first quarter of 2021, is beginning to narrow, as shifting cathode chemistry demand continues to support hydroxide prices in China whilst carbonate gains soften amid limited spot transactions. 

Chinese lithium hydroxide prices a saw 15.5% (EXW China) increase month-on-month in April according to Benchmark’s most recent Lithium Price Assessment

Meanwhile, battery-grade lithium carbonate prices rose by just 6.6% (EXW China) across the same period, with a flattening of movement in the second half of the month caused by extremely limited supply capping spot liquidity, compared to previous gains of 14.2% m-o-m in March and 19.1% m-o-m in February. 

Whilst lithium iron phosphate (LFP) cathode chemistry take-up has surged beyond expectation in China this year impacting demand for lithium carbonate, the market has also started to see rising demand for the previously little utilised high nickel chemistries, primarily NCM 811, as the product undergoes commercial deployment following an extended period of R&D.

As such this has seen hydroxide use increase in the Chinese market and has begun to push up domestic prices.

Additionally, because of the more restricted supply structure for hydroxide due to more limited conversion capacity the chemical is more susceptible to supply tightness with more modest increases in market demand driving the chemical into deficit.

Furthermore, carbonate prices at premium to hydroxide are unlikely to be sustained in China, as newer hydroxide conversion facilities have the flexibility to switch to carbonate production if prices are elevated, meaning capacity can be increased in a carbonate premium environment such as the current one should the company have access to feedstock.  

The sustained upward momentum of Chinese hydroxide prices could see the chemical regain its premium over domestically traded lithium carbonate, restoring the historical market relationship seen prior to the carbonate price rally in Q1 2021.

Outside of China, both lithium hydroxide and lithium carbonate prices continue to surge upward as international market pricing moves to catch up with Chinese domestic prices amid tightening global supply.

Many of the long-term contracts in these regions have integrated price breaks, where prices are renegotiated quarterly, bringing up the bottom-end of lithium chemical price ranges in April as the Q1 2021 rally began to be priced into these contracts.

In the Asian, North American, and European markets, hydroxide remains as the higher-value chemical, due to the longer-term nature of contracts and the cost structure associated with converting carbonate to hydroxide, which is the historical conversion process, as opposed to producing hydroxide directly from spodumene feedstock.

The global lithium supply chain is grounded in complicated inter-market relationships, with Chinese prices often being the early warning system for market sentiment in the rest of the world.

Understanding the relationship between these markets is key to predicting and interpreting price movements in the lithium industry.

Benchmark offers 6 lithium carbonate, 4 lithium hydroxide and 1 spodumene price in its Lithium Price Assessment to subscribers, with thorough analysis provided in our pricing reports to underpin drivers in the market and give a forward-looking, integrated evaluation of the lithium market and other materials in the electric vehicle supply chain. 

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Benchmark’s Lithium price grades

LITHIUM CARBONATE
  • Lithium Carbonate, FOB South America, ≥99.0% Li2CO3
  • Lithium Carbonate, CIF North America, ≥99.0% Li2CO3
  • Lithium Carbonate, CIF Asia, ≥99.2% Li2CO3
  • Lithium Carbonate, CIF Europe, ≥99.0% Li2CO3
  • Lithium Carbonate, EXW China (Battery grade), ≥99.5% Li2CO3
  • Lithium Carbonate, EXW China (Technical grade), ≥99.0% Li2CO3
LITHIUM HYDROXIDE
  • Lithium Hydroxide, FOB North America, ≥55.0% LiOH
  • Lithium Hydroxide, CIF Asia, ≥56.5% LiOH
  • Lithium Hydroxide, CIF Europe, ≥55.0% LiOH
  • Lithium Hydroxide, EXW China, ≥56.5% LiOH
LITHIUM FEEDSTOCK
  • Spodumene Concentrate, FOB Australia, 6% Li20