FX.co ★ Lithium Extends Decline from 1-Year High

Lithium carbonate prices have decreased to CNY 78,350 per tonne, easing from the one-year peak of CNY 87,100 reached on August 19th, as the market reevaluated the extent of supply reductions emerging from China. Prices had previously soared over 40% since the beginning of the third quarter after CATL, the world’s leading battery producer, halted operations at its Jianxiawo mine due to the inability to renew a crucial mining permit. This mine contributes to approximately 5% of the global lithium supply. In conjunction with the elimination of this supply, the suspension bolstered expectations that the Chinese government might intensify its efforts to reduce capacity in overproduced sectors to counteract producer deflation. Nonetheless, lithium carbonate inventories in China increased by more than 30%, reaching 150 thousand tonnes by May, as competitive pressures for market dominance prompted companies to overlook the low output prices. Moreover, uncertainty about whether Beijing will maintain aggressive capacity reductions for lithium following possible initial actions also tempered the third quarter's price rally.