China’s lithium futures have plummeted to a new low, driven by negative macroeconomic sentiment and an oversupply of the metal, which is crucial for electric vehicles. On Friday, the most-traded November lithium carbonate futures on the Guangzhou Futures Exchange reached 69,700 yuan ($9,835.74) per ton, marking the lowest price since the contract’s inception last July. The prices slightly recovered, closing at 71,200 yuan, down 9.8% from the previous week.
Analysts attribute this decline to worsening macroeconomic conditions, highlighted by weak manufacturing data from both the United States and China, which has raised concerns among global investors and pressured risk assets.
The lithium market is also facing a significant supply surplus, with state-backed research firm Antaike forecasting a global surplus of nearly 200,000 tons this year. China, which produces about two-thirds of the world’s lithium chemicals, has seen a substantial increase in output due to ramp-ups of new projects, particularly in the low-cost brine operations in the Qinghai region. Monthly output rose to approximately 65,500 tons in July and 60,900 tons in August, reflecting a more than 40% increase compared to the same months last year.
Lithium futures have declined 12% over the past month and 36% since the beginning of the year. However, analysts like Zhang Weixin from China Futures suggest that demand may rise in September and October, potentially providing some market support before further declines in the fourth quarter. Notably, in July, sales of electric vehicles and hybrids in China surpassed 50% of total car sales for the first time, despite an overall drop in car sales.