Small Chinese Lithium Carbonate Companies Close as Market Prices Drop

China: Recent reports suggest that some small Chinese Lithium Carbonate companies have been forced to shut down due to the plummeting price of the major material for electric car batteries. This decline was largely precipitated by a cooling down of China's new energy vehicle market, causing a build-up in inventory and significant financial difficulties that are proving too much for some businesses to overcome. As a result, many are facing huge losses and even bankruptcy as they struggle to survive.

Prices of battery-grade Lithium Carbonate plunged by an astonishing CNY12,500 (USD1,820) to a record low of CNY300,000 (USD43,620) a ton today. This marks a 40 percent decrease from the highest prices seen last November.

Despite producers trying to offload their stock quickly, downstream buying is on hold due to a 'wait-and-see' attitude - and some overseas orders have been cancelled as well. It's certainly an unpredictable time for Lithium Carbonate prices.

China ended its 13-year subsidies for New Energy Vehicles (NEVs) in 2020, resulting in a rapid cooling of the NEV market. Retail sales of new energy passenger vehicles dropped by 6.3 percent in January 2021 compared to the previous year. However, February 2021 saw an increase of 61 percent from the same period last year - though still under the average monthly figure from last year.

The cost of raw materials for the NEV industry has been on the decline, and this could bring about a beneficial long-term effect. With lower costs, midstream and downstream enterprises will be able to increase their profitability, leaving more room for NEV firms to reduce prices and boost market demand in order to aid its recovery.