On January 23, the main lithium carbonate contract on the Guangzhou Futures Exchange surged over 5% at one point, reaching a high of 178,000 yuan per ton. A J.P. Morgan report indicated that the bank conducted a field trip in Yichun last week, visiting lithium refineries/tailings facilities and meeting with local experts. Key observations included: the restart timeline for CATL's Jianxiawo lithium mine remains uncertain, and lithium prices are expected to stay elevated until it resumes operations; the cost of lithium carbonate from integrated lepidolite mines has dropped to around 60,000 yuan per tonne; current prices are incentivizing more supply, and recycling volumes are projected to increase significantly by 2028.
A research report from China Securities Co., Ltd. pointed out that Jiangxi's lepidolite lithium mines are facing production suspension pressures due to follow-up procedures for license renewals. Furthermore, stricter regulatory oversight on tailings disposal following the implementation of the "Comprehensive Solid Waste Management Action Plan" has amplified supply-side concerns. Concurrently, some lithium salt plants have maintenance scheduled during the Spring Festival period, leaving the supply side with almost no flexibility at present. While significant supply increases are anticipated on an annual basis, this will not alleviate the tight supply situation in the first half of the year.
On the demand side, expectations of a rush to export driven by export tax rebates have led to stronger-than-expected consumption during the traditionally slow season, making inventory accumulation difficult and laying the groundwork for potential supply tightness in the second quarter. According to SMM data, domestic lithium carbonate inventories decreased by a further 783 tonnes week-on-week. Finished product inventories at upstream lithium salt plants are below 20,000 tonnes, while downstream material plant inventories are under 40,000 tonnes, both at relatively low levels, with the price drop triggering a noticeable inventory replenishment effect.
The off-season for consumption has proven unexpectedly strong, with destocking continuing, indicating a relatively robust fundamental picture for lithium. Concerns about supply tightness in the second quarter are intensifying. J.P. Morgan expressed greater optimism regarding short-term lithium prices but adopted a more cautious stance on the medium-term outlook. The bank was notably impressed by how low lepidolite costs could fall and anticipates further cost reductions ahead. It sees a trading opportunity in lithium stocks in the short term, suggesting that share prices will catch up with the rising trend of lithium carbonate prices. In J.P. Morgan's view, lithium prices are expected to remain high as investors delay their expectations for mine restarts.
Hong Kong-listed stocks related to the lithium carbonate industry chain include: Ganfeng Lithium Group (01772) and Tianqi Lithium Corporation (09696).
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