Producers, consumers of lithium differ over 2019 contract prices
Published: Tuesday, 04 December 2018
The fall in Chinese spot lithium prices has been at a faster pace than the fall in US and European prices, throwing up differences in opinion about contract prices in supply deals for 2019.
Lower lithium prices than a year ago have led to differing
price expectations between producers and consumers of lithium
compounds in their negotiations for 2019 supply contracts.
In light of lower spot prices in China,
lithium consumers are seeking to lock in lower contract prices
for 2019 by referencing the Chinese spot market price in their
deals. But lithium producers are trying to keep prices
unchanged year on year due to expectations of strong demand for
lithium compounds over the coming years.
"Lower Chinese prices are being used by consumers to obtain
lower prices for next year," a lithium producer told
Fastmarkets IM. "It is undoubtable that Chinese prices affect
the rest of the world prices… we will [therefore] start
next year with softer prices than the ones achieved in
"The Chinese domestic spot price has an important influence on
rest-of-the-world prices," an Asian lithium distributor said.
"Despite the expected huge increase in demand for lithium
compounds for 2019, global contract prices are going down and
that is mainly because consumers with business partners in
China are aware of the lower prices in China."
Chinese spot prices have fallen further than US and European
contract prices from this time last year.
Fastmarkets IM assessed the battery grade lithium carbonate min
99.5% (Li2CO3) contract price on a cif China, Japan and Korea
basis at $13-16 per kg on Wednesday November 28, down by 21.62%
from $17-20 per kg on November 29 last year*.
The battery grade lithium hydroxide min 56.5% (LiOH.H2O)
contract price cif China, Japan and Korea was $16-18 per kg on
November 28, down by 15% from $18-22 per kg on November 29,
The European and US battery grade lithium carbonate min 99.5%
(Li2CO3) contract price on a ddp basis was $13-16 per kg on
November 28, a drop of 19.44% from $17-19 per kg on November 29
In the same comparison, the battery grade lithium hydroxide min
56.5% (LiOH.H2O) contract price at $16-18 per kg ddp Europe and
US was down by 8% from $17-20 per kg.
While some market participants cited lower spot prices in China
and a supply glut as the main reasons that contract prices
should fall, lithium suppliers are adamant that China has a
limited influence on prices in the rest of the world.
"Until now, the market dynamics observed in China have not
spread to the rest of the market, except India perhaps [for
lithium hydroxide]," a second lithium producer told
"Japanese and Korean cathode manufacturers have strict
qualification procedures so we only see a reduced number of
Chinese producers supplying those markets and still at reduced
quantities," the producer added. "This will probably change in
the medium term only, not in the coming months."
Slow spot consumption and excess supply have pushed down the battery-grade
lithium carbonate spot price in China by 55.14% to
74,000-83,000 ($10,638-11,932) yuan per tonne as of November 29
from 180,000-170,000 yuan per tonne on November 30 last
The battery grade
lithium hydroxide spot price in China has fallen by 24.65%
to 105,000-115,000 yuan per tonne from 142,000-150,000 yuan per
tonne over the same period.
Since the demand shock at the end of 2015, lithium contract
prices had trended higher toward the level of spot prices in
China (see graph below) until the fourth quarter of this
But contract prices have softened recently, falling month on
month throughout the fourth quarter of 2018. This highlights
China’s influence on prices elsewhere and
especially in contracts signed with companies that have direct
relationships with Chinese battery makers.
While market participants believe the
Chinese spot market has become overheated, lower spot prices
there and excess supply have progressively pushed down contract
prices elsewhere - they are following the trend a year
Contract prices across the globe should soften slowly and catch
up with spot market trend, reflecting growth both in Chinese
production and consumption of lithium compounds. This makes the
Chinese spot market a decent indicator of the direction in
Chinese contract prices.
Lithium producers and consumers have since 2015 increasingly
signed quarterly, half-year or annual contracts that use the
trend in the Chinese spot price and market fundamentals as
reference points to determine the lithium price for those
Volumes are typically locked in but the formulae can include
floor and ceiling prices subject to spot market movements; or
fixed prices throughout the term of the contract. Before the
price spike in 2015, contracts were typically for more than one
year at a fixed price.
Still, some larger producers and consumers - with contracts of
at least 300 tonnes per year - have retained the longer-term
approach by locking volumes for between one and three
Another growing trend - mainly in Asia but increasingly in
Europe and the US - has been a willingness to mix thing up,
buying both on spot and on contracts.
"We could save up to $8 per kg if today we buy material in the
spot market in China compared to our current contract prices,"
the Chinese cathode maker said. "We have increased the amount
of material purchased on a spot basis and this could be an
increasing trend if prices in China remain low."
*All lithium carbonate, hydroxide and spodumene prices are
available in our Battery Raw Materials Market Tracker. Get
a sample of the report here.