Last year marked a spectacular recovery in lithium prices,
with the market rebounding into growth from the lows of 2020
and pushing lithium carbonate back to the forefront of the
battery market. Underpinned by a renewed wave of demand in
China and elsewhere, the relentless rise of lithium carbonate
prices during 2021 took the compound to a premium from what was
historically a discount against further-refined lithium
The counter-intuitive price progression took the
sector by surprise, but market participants have argued that
there are fundamental factors that may continue to support the
carbonate premium over hydroxide into early 2022.
"What  has shown is that carbonate is here to
stay," one Europe-based lithium processor source told
Fastmarkets. "The push on carbonate in 2021 [was]
Lithium prices more than doubled across the board
during 2021, and the sector entered a new bullish cycle
following the multi-year lows of late 2020.
Fastmarkets’ price assessment for lithium carbonate 99.5% Li2CO3 min, battery
grade, spot prices, cif China, Japan & Korea, was
$6.00-7.50 per kg in early January 2021. At the same time, the
assessment for lithium hydroxide monohydrate LiOH.H2O 56.5%
LiOH min, battery grade, spot price, cif China, Japan &
Korea, stood at $8.50-9.50 per kg, showing a solid couple
of dollars per kg of premium over carbonate.
That was broadly the way the two prices had interacted since
Fastmarkets launched the assessments in 2017 – the
spreads had widened and narrowed, but they never traded places.
Last year changed that.
Fast-forward to January 2022, and hydroxide hit $41-43
per kg on January 27, 2022, a 366% increase at the mid-point
compared with where it was a year before. Carbonate, meanwhile,
had started lower but ended at a higher level than its
further-processed cousin. The Fastmarkets carbonate assessment
hit $44-47 per kg on January 27, 2022 – that is 574%
higher than in January 2021 and, crucially, more than $3 per kg
higher than hydroxide.
From December, Fastmarkets has increased its price
assessment frequency to daily for the two seaborne Asia
assessments of lithium carbonate and hydroxide.
An LFP battery story
The surge in carbonate demand and price is largely
credited to the performance of lithium iron phosphate (LFP)
batteries since last year, and their expected medium-term
Among the most tried and tested battery technologies,
LFP batteries have a relatively low energy density compared
with other chemistries, but they offer reliability, stability
and safety. Costs of LFP are also lower than other batteries,
such as nickel-cobalt-manganese (NCM), which employ costlier
While LFP batteries were seen as somehow on the back
foot in previous years, with original equipment manufacturers
(OEMs) favoring higher-performance NCM or
nickel-cobalt-aluminium (NCA) chemistries, developments over
the past year have drawn a different picture.
LFP has cemented its position as the leading chemistry
among manufacturers in China, currently the single largest
market for electric vehicles (EVs). At the Antaike Nickel &
Cobalt conference last November, attendees estimated that LFP
batteries now account for the largest share (some 60%) of the
market in China, with NCM taking most of the remaining
Outside China, LFP has also been gathering new
interest from international OEMs. German automotive group
Volkswagen said last March that it would adopt multiple battery
technologies in its models across the group, depending on the
type of car and consumer to whom they will be marketed. LFP
will feature mostly in VW’s compact-vehicle
United States-based EV manufacturer Tesla announced
last October that its standard-range models sold globally will
employ LFP batteries.
Panelists speaking at Fastmarkets’
Lithium 2021 conference said that, although lithium-ion is set
to remain the dominant technology for the EV market, the
industry will simultaneously rely on various chemistries
depending on performance, raw material costs and
companies’ own strategies.
The outlook appears supportive of growing LFP demand
– and, as such, will be key to determining the future
price trend of lithium carbonate feedstock.
Premium to persist?
Market participants in conversation with Fastmarkets
said that the current premium that the carbonate price holds
against hydroxide is likely to persist throughout the first
half of 2022, although the overall price differential between
the two compounds will be elastic.
Sources pointed to a variety of factors that are
expected to underpin this trend, including capacity ramp-up of
LFP battery materials versus other chemistries; conversion
capacity bottlenecks for carbonate against hydroxide; and the
entrance of more intermediaries into the carbonate
The aggressive production ramp-up of LFP battery
capacity to meet automotive demand will continue to challenge
the availability of lithium carbonate, market participants
said. As LFP chemistries gained new favor among major OEMs,
producers in China that have until now been solely focused on
NCM materials are keen to join in and are investing to supply
LFP materials as well.
China NCM battery precursor materials manufacturing
giant Huayou Cobalt announced in November that it plans to
build an integrated plant with Xinfa Chemicals with capacity
for 500,000 tonnes per year of LFP material.
"There will be a high ramp-up of LFP capacity,
supporting battery-grade carbonate demand and price while, at
least for now, NCM production has not [seen the same degree of
expansion]," a China-based trader said. "Even with new NCM
capacity, it will take a while before that is fully realized
and translates into higher demand for hydroxide."
Market sources said they estimate that the annual
production growth rate for LFP batteries will exceed 100% in
2022, while that of NCM batteries is expected to be around 30%.
"Rising demand of LFP batteries will underpin the price for
lithium carbonate and support a premium [over] hydroxide until
mid-2022," a lithium producer in China said.
The Fastmarkets battery materials research team
forecast a pick-up in both carbonate and hydroxide output in
2022, with carbonate rising by 118,000 tonnes and hydroxide
rising by 70,000 tonnes.
Traders enter the fray
More intermediaries active in the market are expected
to play a part in price projections. The high level of activity
in lithium carbonate has attracted a growing number of traders
to the space over the past year, which is likely to fuel
further price volatility and accelerate price upturns while
supply tightness persists.
A trader in China acknowledged that it is easier for
traders to get involved in carbonate since it has fewer
logistics restrictions and can be stored more easily and for
longer. Conversely, hydroxide is mostly moved directly between
producers and consumers since OEMs can only purchase materials
from qualified producers – which effectively limits
The price parity achieved by lithium carbonate and
hydroxide last September was mentioned as an example of this
momentum when traders piled in to stockpile at the end of the
The September monthly average price of
Fastmarkets’ battery-grade lithium carbonate
assessment in domestic China rose by 56% to 160,000 yuan
($25,150) per tonne from the prior month – marking the
single biggest monthly price increase since Fastmarkets
launched the assessment. "While the carbonate market will be
undersupplied in 2022, its price may rise more quickly [than
hydroxide] with traders’ involvement," the same
trader source in China said.
In addition, the seaborne Asia market is expected to
mirror the domestic China market in early 2022, market sources
told Fastmarkets, citing tighter availability of carbonate
outside of China as a factor that would prop up the carbonate
price against hydroxide.
"Supply of hydroxide is comparatively adequate in the
seaborne market, with the additional Chinese output exported to
Japan and South Korea, but China will export less carbonate
since the bulk of it will be consumed domestically," the first
lithium producer source said.
All that said, market participants believe the price
differential between carbonate and hydroxide will be elastic
during 2022. The potential for a widening price gap would push
producers to shift more to carbonate, which in turn would ease
the supply constraint and narrow the price gap between the two
Some have suggested that producers may be encouraged
to convert their lithium hydroxide units into carbonate if the
latter’s spot price is at least 20,000-30,000 yuan
per tonne higher, given that the additional processing costs (a
few thousand yuan per tonne) are relatively low.
"When the price gap allows converting hydroxide to
carbonate, [tightness] in hydroxide should increase, which
would support a higher price," a second lithium producer source
in China said, adding that he expected an "equilibrium [to
eventually develop between] the two prices."
Other sources pointed out that the new production
lines in China are flexible in terms of switching between
hydroxide and carbonate. Producers’ output could,
therefore, be adjusted based on the price differentials in the
market; this could go some way toward easing a carbonate
shortage, but might also affect the bullish price momentum in
A European processor distinguished between an
immediate-term and a longer-term outlook. He said that the
capacity constraints of carbonate would ensure a near-term
premium to continue "in the first quarter and probably beyond
"In the long-term," he said, "I still think that
hydroxide will ultimately be the more expensive of the two
– it’s a further refined compound, needs
additional processing, so it should go back that way. But until
then, the carbonate premium will stay."