Lithium Prices Rebound After Chile Earthquake

BEIJING (Reuters) – China’s lithium prices rebounded on Friday following a powerful earthquake in Chile’s major lithium-producing region, although concerns about growing demand weighed on the metal used in electric vehicle batteries.

The most-traded November lithium carbonate futures on the Guangzhou Futures Exchange rose 2.9% to 89,800 yuan ($12,356.89) per metric ton on Friday, recovering from a seven-month low of 86,450 yuan recorded in the previous session.

A 7.3-magnitude earthquake struck northern Chile, which holds the world’s largest lithium reserves—90% of which are located in the Atacama desert near the epicenter. This event raised supply concerns since Chile is a major exporter of lithium chemicals to China.

Investor sentiment had also shifted earlier in the week amid increasing speculation that Donald Trump might win the U.S. presidential election in November. The Republican candidate has promised to reverse many of President Joe Biden’s climate change initiatives, including those promoting electric vehicles (EVs).

Zhang Yuan, an analyst at CITIC Futures, noted that a Trump administration less favorable to EVs added to demand concerns amid already low EV sales in the U.S. and Europe.

In Europe, fully electric and plug-in hybrid vehicle sales fell 7% in June, according to market research firm Rho Motion, while sales in the U.S. and Canada grew by 6%.

Macquarie analysts forecast that EV sales growth in China, the main driver for the industry, will slow from 30.2% last year to 24.6% this year.

Increasing supplies have also contributed to downward pressure on prices. China produced 303,200 tons of lithium carbonate in the first half of the year, reflecting a 57.4% increase from the same period last year, as per Mysteel data.

“Improved lithium carbonate prices since March have encouraged production. However, recent price drops may cause producers to reduce output,” Zhang remarked. A decline in output is expected in August.

A growing surplus has led to lower prices after they peaked in November 2022. CRU’s latest forecast predicts a global surplus of 90,000 tons of lithium carbonate equivalent for this year.

Due to falling lithium product prices, Chinese producers Ganfeng Lithium and Tianqi Lithium have warned of losses for the first half of 2023.