Column: Lithium slump puts China’s spot price under the spotlight – by Andy Home (Reuters – May 19, 2023)

LONDON, May 19 (Reuters) – High-flying lithium has come crashing back to earth. A super-charged two-year rally, which saw Chinese spot lithium carbonate prices rise by tenfold, went into brutal reverse over the first part of this year. The spot price slumped by 70% between November and its low point in April.

The battery metal was knocked off its heights by early-year weakness in China’s electric vehicle (EV) market, still by some margin the world’s largest. The temporary demand hit rippled back up through the Chinese battery chain, generating a collective destocking cycle and killing the spot market.

The slump in China’s spot price dragged down the whole lithium pricing chain from spodumene concentrate to hydroxide, albeit to highly varying degrees. The price impact looks outsize to what was a short-term mismatch of supply and demand in the Chinese domestic market, where the spot price is already bouncing back hard.

But lithium’s roller-coaster ride highlights the important role China’s spot market and the Wuxi futures exchange play in the fast-growing industry’s price discovery process.

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