Global Business, BICHEM Group
This July, the lithium industrial chain presented a stark paradox. While futures prices for lithium carbonate briefly surged to ¥80,000 ($11,000) per tonne, lifting spodumene prices, this momentum failed to translate into downstream battery markets. The anticipated supply-driven price rally ultimately ran aground on the shoals of tepid end-user demand. This fundamental mismatch between upstream expansion and downstream stagnation is now squeezing margins and forcing reassessments across the chain. Price, as ever, exerts the most direct influence on upstream production decisions.
The July price rise offered immediate relief to refiners, swiftly translating into higher output. Data indicates China's lithium salt production exceeded 70,000 tonnes for the month, a month-on-month increase surpassing 7%. The stimulus also rippled upstream: rebounding carbonate prices pulled lithium ore prices higher. This reaffirmed the basic economic tenet that higher prices incentivise greater supply – a dynamic now playing out globally.
However, the increasing pressure at the raw-material-end failed to be transferred successfully to the downstream of lithium battery industry. In July, the cost of raw material of lithium iron phosphate cathode material went up to about ￥2,000 per tonne; Yet, the anode sector has seen prices weaken since June. With costs rising and selling prices under pressure, competitive intensity within the battery sector shows no sign of abating.
A critical development in the first half of the year was the declining concentration in both the automotive and power-battery sectors. The combined market share of the top ten battery firms actually fell by 2.5 percentage points compared to last year. This suggests the long-anticipated industry consolidation—a "survival of the fittest" shakeout – has yet to materialise. Instead, fierce price wars aimed at capturing market share continue, relentlessly testing the profitability of the entire sector.
It is the end market that shows real sluggishness. Electric-vehicle (EV) sales growth is sliding from “low increase” into “reducing scale”. Data shows that in the first three weeks of July, the retail volume of Chinese new-energy passenger vehicles has fell by 12% month on month. This sluggish demand stems from multiple factors: subsidiary polices are implemented more cautiously to avoid depleting funds ahead of schedule, limiting the monthly stimulus effect—there are even actual “window” regarding subsidiaries in June. Furthermore, from August onwards, the market faces challenging year-on-year comparisons against high sales bases set in 2024. Adding to the pressure, overseas energy-storage markets are cooling as installation cycles peak. The new energy industry is now forced to seriously consider about the way of “penetrating the rest 50% of the market” under the current structural dilemma of the end.
Faced with this complex landscape, market participants hold divergent views. Scissor-like differences are emerging in the production schedules of leading lithium producers, signalling a turbulent and uncertain lithium market for August and the remainder of the year. The inertia of upstream capacity expansion looks set for a collision with downstream demand reality over the next five months.