Chinese lithium futures extended a deep selloff this week as concerns about the demand outlook for the battery metal grew. The most-active lithium contract on the Guangzhou Futures Exchange briefly slipped below 100,000 yuan ($14,942) a ton on Thursday before recovering some losses. Prices have plunged about 14% this week, extending a slide that began at the end of August, and Chinese futures have tumbled 37% over the past seven weeks.
Lithium took a hit earlier this week after the European Union and China agreed to limit hybrid-car exports to the bloc, adding to lingering worries about demand for electric vehicles and large-scale energy-storage systems. Zhang Weixin, analyst at China Futures Co., said, "A consensus of a bearish market is taking shape in the industry as the price drop accelerates."
Goldman Sachs Group Inc. echoed those concerns, forecasting that the lithium market will shift from a deficit to near balance in the fourth quarter, followed by surpluses over the next two years. The bank pointed to softer underlying growth in the electric-vehicle and energy-storage sectors, which reduces the need to build inventories.
The battery ingredient is also being swept up in a broader decline in equities, fueled in part by concerns over stretched chip-stock valuations and the cost of building artificial-intelligence infrastructure. Bets that the Federal Reserve will need to raise interest rates further have also weighed on sentiment, with higher borrowing costs potentially adding pressure on manufacturers.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing