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Chinese lithium producers establish a minimum price as demand decreases, sources

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Chinese lithium producers establish a minimum price as demand decreases, sources

China’s leading lithium producers have reportedly agreed to establish a price floor of 250,000 yuan ($36,380) per tonne of lithium carbonate, as per six individuals who are familiar with the situation. The move is aimed at curbing a sharp decline in the price of the battery raw material due to reduced demand.

According to six individuals familiar with the matter, a group of around 10 companies, including Tianqi Lithium (002466.SZ) and Ganfeng Lithium (1772.HK) (002460.SZ), agreed to set a price floor of 250,000 yuan ($36,380) per tonne of lithium carbonate during a meeting held on Tuesday in Nanchang, located in southern China, on the sidelines of a conference.

As the topic was discussed behind closed doors, the sources who spoke to Reuters declined to be identified due to its sensitivity. However, Ganfeng Lithium denied any discussions on setting a floor price, in response to the Reuters report.

Ganfeng denied the reports of setting a floor price, stating that they always rely on market determinations for product pricing and do not attempt to control prices to influence the market. In an email statement, a representative of the company stated that no company in the industry has the capability to do so. Tianqi declined to provide any comment on the matter.

Four of the people who attended the meeting said that Zhicun Lithium, a major lithium carbonate producer in China, was also present, but could not be contacted for comment. The agreement on a price floor for lithium carbonate comes amidst a sharp decline in prices due to a significant decrease in demand for electric vehicles (EVs) in China, which is the world’s biggest market for EVs.

The spot prices for lithium have dropped by over 60% since their peak in late November, with the decline accelerating in recent weeks due to the intensifying price competition in China’s auto market. Over half of China’s lithium carbonate output is produced by the around 10 companies that agreed to set a floor price of 250,000 yuan ($36,380) per tonne of lithium carbonate earlier this week. However, it remains unclear for how long they will adhere to the floor price.

According to Fastmarkets’ weekly price assessment, spot prices for lithium carbonate fell to 220,000 yuan per tonne on Friday, compared to 260,000 yuan the previous week. Traders looking to reduce their inventory reportedly made offers as low as 150,000 yuan this week, according to a battery manufacturer’s buyer who did not participate in the meeting of lithium producers.

According to the attendee of the meeting, “Setting a floor price should strengthen the market sentiment and hold the prices from falling further.” However, some buyers doubt that producers will maintain the floor price due to weak demand.

According to a lithium carbonate buyer who was briefed on the decision, “if we don’t buy, someone will eventually drop the price.” In addition, two of the people said that the participants at the meeting also discussed the upcoming launch of lithium carbonate futures on the Guangzhou Futures Exchange, which could be another measure to stabilize prices.

Source: Reuters

About Vijendra

Vijendra
Vijendra has a master’s degree in Marketing and editor with passion. Exploring economic policies of different economies and analyzing geo-politics policies is of keen interest. In his free time he is a hardcore metal-rock and punk music fanatic.

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