Guotai Junan: Downstream has basically completed pre-holiday stockpiling, lithium carbonate experiences another sharp decline

Recently, lithium carbonate prices have experienced a correction, mainly driven by short-term market sentiment and seasonal factors. As the Chinese New Year approaches, speculative activity in the futures market has significantly cooled down. Meanwhile, many downstream manufacturers had already completed their stockpiling for the Spring Festival during the previous period when prices were relatively low. Currently, procurement has slowed down, leading to a generally subdued market trading atmosphere. However, the underlying logic supporting lithium carbonate prices—“supply contraction” and “demand resilience”—has not undergone a fundamental reversal. On the supply side, there is a substantial tightening: on one hand, lithium salt producers generally enter their traditional maintenance and shutdown period around the Spring Festival, and domestic lithium carbonate output in February is expected to decline noticeably; on the other hand, lithium extraction from salt lakes in Qinghai, Tibet, and other regions is significantly affected by low winter temperatures, resulting in considerable capacity loss. On the demand side, the electric vehicle battery sector still anticipates “export rush” due to the upcoming adjustment of the battery export tax rebate policy on April 1, supporting battery manufacturers’ production schedules. Additionally, the energy storage industry continues to improve under policy support, providing a solid long-term demand foundation for lithium carbonate. Therefore, despite being in the traditional off-season for consumption, social inventories of lithium carbonate still show a trend of destocking, reflecting that the current supply and demand fundamentals are not as weak as surface prices suggest. In simple terms, the recent price decline is more like a “sentiment cooling” before the holiday, while the basic pattern of “short-term supply contraction” and “demand support” still seems to be ongoing. (Guotai Junan Futures)