After showing signs of recovery earlier this year, lithium prices have resumed their downward trajectory over the past three months. Notably, lithium carbonate prices have tanked from around 117,000 CNY/T to as low as 94,500 CNY/T during this period. The underlying trends in the lithium-EV value chain, however, seem to be moving in diverse directions. While Chile is ramping up its lithium production, China is clamping down on its excess battery capacity.
Chile Looks to Increase Output
Chile is currently the world’s second-largest lithium producer. The country is focused on ramping up its lithium production even as overcapacity weighs heavily on prices. Earlier this year, Chile invited proposals for developing lithium projects in over two dozen salt flats. The country has received interest from over 50 companies to develop 88 projects, according to Reuters. Recently, Chile also granted Albemarle, the largest lithium producer for EV batteries globally, an option to increase its production quota in the country by 240,000 metric tons of LME (lithium metal equivalent).
Meanwhile, in China…
While lithium producers are looking to increase output, a different scenario is playing out in the lithium battery market. China is looking to curb overcapacity in its lithium battery industry. This week, the country outlined new guidelines for its lithium battery players, focusing more on quality than quantity. The new norms outline minimum energy density standards as well as more stringent battery specifications. Additionally, China is pushing its companies to avoid setting up new facilities that “only” increase capacity.
According to Bloomberg, China’s lithium battery production last year alone was sufficient to meet global battery demand. This highlights the overcapacity burden currently weighing on the sector.
How Much Is LIT?
In the meantime, the Global Lithium & Battery Tech ETF (LIT) at $39.88 per share is down by nearly 36% over the past year. The TipRanks Technical Analysis tool is flashing a Sell signal on the ETF on a monthly timeframe, indicating continued selling pressure.
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