Posted on 05 Sep 2024
Traders are cautiously optimistic about the upcoming peak season of September and October in the Chinese battery market, Kallanish learns from Galaxy Futures analysts.
“Orders received by battery factories increased significantly in September,” the analysts said in a webinar on Wednesday. “The downstream market relies on customer supply and long-term agreements to maintain rigid demand purchases, and there is a strong wait-and-see sentiment. Some material factories with poor orders are even selling their lithium carbonate inventories.”
The Chinese broker says that data shows that inventories at smelters remain at high levels while downstream inventories are close to the highest levels of the past few years, indicating that the accumulated storage is transmitted downstream.
Accordingly, in July, lithium carbonate inventories accumulated at smelters exceeded 50,000 tonnes, reaching the highest July level during 2021-2024. In July 2023, inventories were around 35,000 t; up from the 10,000 t seen in July 2022 and 2021.
Meanwhile, downstream stockpiles reached about 30,000 t in July, hitting an all-time high during 2021-2024. These inventories were roughly 12,500 t in July 2023 and almost 25,000 t in July 2021. In 2022, volumes were around the same level as this year.
At the same time, Galaxy Futures notes that weekly inventories show increasing inventory pressure to destock. Currently, lithium carbonate inventories at smelters, downstream and others stand at around 130,000 t.
The analysts say the lithium carbonate warehouse receipts of the Guangzhou Futures Exchange have basically returned to the level before the centralised cancellation at the end of July, and are still increasing. A warehouse receipt is a document that is used to ensure the quality and quantity of a commodity that is stored in an approved facility. It gives the holder ownership of the goods it represents. Industrial clients sometimes use warehouse receipt cancellation to change the market’s price expectation.
In September, Galaxy Futures expects the total lithium carbonate supply in China to have a small on-month increase of 4% to 65,000 t. For January-September, it expects supply to increase 49% year-on-year.
“In August, except for the full production and sales of salt lakes, spodumene and lepidolite smelters all reduced production, and the output of lithium carbonate decreased by 2.8% month-on-month,” the analysts reveal. “In July, China imported 24,100 t of lithium carbonate due to the Chilean shipping schedule and increased shipments from Argentina. It is expected that imports will drop month-on-month to less than 20,000 t in August and September.”
As of Wednesday, GFEX’s lithium carbonate futures for September delivery settled at CNY 74,000/t ($10,396/t) while the October contract settled at CNY 74,150/t.
Source:Kallanish
