Widening lithium hydroxide-carbonate spread tightens supplies of hydroxide, pushing up prices

The wider gap between the lithium carbonate and lithium hydroxide prices has increased conversion from hydroxide to carbonate, but that has, in turn, tightened hydroxide supplies and pushed up prices. 

Lithium carbonate prices were 15,700 yuan per tonne higher than lithium hydroxide as of Thursday, November 14 – a calculation based on Fastmarkets’ latest weekly price assessments for battery-grade lithium salts.

Since June 2023, lithium carbonate prices have consistently maintained a premium over hydroxide, reversing a prolonged period of discounts. And the widening price gap has accelerated the conversion of significant quantities of lithium hydroxide into carbonate by major producers.

At least six major lithium salt producers have shifted part of their hydroxide production to carbonate, according to a trader source, who did not disclose the extent of the reduction in hydroxide output.

And two Sichuan-based lithium producers told Fastmarkets they had switched some of their production lines from producing hydroxide to producing carbonate.

In addition to switching production to carbonate, several Chinese lithium producers told Fastmarkets they had converted existing hydroxide products into carbonate.

“For a lithium converter, the cost to convert one tonne of hydroxide into one tonne of carbonate is a couple of thousand yuan. Now the gap between carbonate and hydroxide prices is wide enough to make the conversion economically viable,” a Chinese lithium producer source said.

And a Chinese lithium trader told Fastmarkets: “For those who don’t have their own conversion capacity, the cost to convert one tonne of hydroxide into one tonne of carbonate is just slightly above 10,000 yuan per tonne.”

But the reduction in available hydroxide supplies is making it difficult for anyone to buy spot hydroxide and then convert it to carbonate, especially as lithium producers are doing so themselves because of the improved margins, market participants said.

“We are converting our own hydroxide to carbonate for better margins, rather than selling our hydroxide to others so they can make margins from the conversion,” the Chinese lithium producer source said.

Tighter supplies, higher costs push up hydroxide prices

In addition to tighter supplies, the elevated cost of production is therefore another major contributor to the increase in lithium hydroxide prices, Fastmarkets understands.

“Based on the current [lithium] hydroxide prices, spodumene prices need to be no more than $730 per tonne for producers to break even,” a second Chinese lithium trader said.

But because of the current high spodumene prices, Chinese lithium producers sources told Fastmarkets they lose money on every tonne of lithium hydroxide they deliver.

Fastmarkets’ price assessment for spodumene min 6% Li2O, spot price, cif China fell to $840-870 per tonne on Friday November 15, down from $850-880 per tonne on November 14.

One major NCM cathode manufacturer source told Fastmarkets it had received a notice from a hydroxide supplier canceling its December contract deliveries.

“I believe their real goal [of canceling December deliveries] is to raise prices,” the source said, adding that new hydroxide offers from the supplier, and others, have exceeded 70,000 yuan per tonne.

“They have all revoked the 7% discount previously offered for long-term deliveries,” according to the trader source.

Weak demand for NCM batteries in China had weighed on lithium hydroxide consumption over the past two years – while the rapid growth in the energy storage sector partially offset the slowdown in demand for electric vehicles (EVs) and supported demand for LFP batteries and lithium carbonate.

Fastmarkets’ weekly price assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price range exw domestic China, rose to 68,000-70,000 yuan ($9,390-9,665) per tonne on November 14, up by 2,000-3,000 yuan per tonne from 65,000-68,000 yuan per tonne a week earlier.

The price rise is the increase after three weeks of stability

Fastmarkets’ weekly assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 83,400-86,000 yuan per tonne on November 14, up 9,400-10,000 yuan per tonne from 74,000-76,000 yuan per tonne a week earlier.