According to Bloomberg, on September 22, lithium carbonate prices, a key raw material in electric vehicle (EV) battery making, continued to rally to a new record, leaving the communist regime helpless.

The outlet, citing data from Asian Metal Inc., reported that lithium smashed $70,716 (500,500 yuan) a ton in China, a threefold increase from a year ago. In yuan terms, this figure is even higher than the previous level earlier this year, which Tesla founder Elon Musk had already called “insane.”

Beijing held a meeting last week to review and ask major industry firms to help stabilize lithium prices. But Peng Xu, an analyst at BloombergNEF, said, “In the short term, I don’t think the meeting will help China cool the rally.”

Xu further explained that prices of seaborne spodumene, an unfinished form of lithium, are also surging as supply struggles to meet strong demand. This would squeeze the market for Chinese lithium producers even more and thus push current prices higher in the time ahead.

Bloomberg noted that the lithium market’s problem this time is not easy for Beijing to solve as it was at the previous peak in March.

Back then, the COVID lockdowns discouraged overall market demand. Moreover, consumers could not cope with the high prices of other battery raw materials such as nickel and cobalt. Therefore, Beijing had to order producers to adjust prices and quickly halt the rally.  

But now, the market situation has changed. 

China’s total output of electric cars last month was more than twice the amount from a year earlier. The China Passenger Car Association projects that the number of EVs this year will hit a record of 6 million cars.

Thus, lithium supply is still not enough to meet high market demand. Moreover, there are future concerns about sufficient power for normal operations this winter in major manufacturing hubs. 

As reported by Bloomberg, a power rationing happened last month in the province of Sichuan, home to more than 20% of China’s lithium manufacturing. As a result, the region had two weeks of blackout, impeding the production capacity in an already-squeezed market.

An Australian auction on September 20 saw the biggest-ever winning bid regarding market tightness. Pilbara Minerals Ltd. said the winner offered to deliver a 5,000-ton cargo of spodumene to China for $7,708 per ton.

As Chinese traders often purchase raw materials in dollars, the 10% depreciation of the Yuan this year also increased lithium prices. 

In addition, SCMP reported that the U.S. Federal Reserve’s 75-basis-point hike on September 21, the highest level of benchmark interest rates since 2008, further broadened the monetary policy gap between the two biggest economies in the world. 

This will, in turn, exacerbate the lithium rally in China.

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