Lithium carbonate futures market faces pressure due to rising warrant inventories. The benchmark contract settled at RMB 172,980/tonne, down 3.91%, primarily driven by the accumulation of exchange warrant inventories, creating a significant overhang on prices. Downstream restocking demand remains subdued, while midstream traders convert spot material into exchange-deliverable warrants, further increasing warrant inventories to elevated levels. Fundamentally, the market is in an inventory-drawdown phase in June, with slower-than-expected supply growth and improving downstream demand supported by rising LFP cathode production schedules. However, the market has already priced in much of this narrative, limiting further price appreciation unless there is a new supply or demand surprise. The recent marginal increase in lithium ore processing fees may indicate expectations of improved raw material availability as Zimbabwean lithium concentrate shipments arrive in greater volumes. The ongoing inventory drawdown should provide underlying price support, but near-term market performance remains constrained by warrant overhang and other bearish factors. A cautious trading stance is advised, with attention on downstream procurement activity and production resumption pace in Jiangxi.
Key data:
- Lithium carbonate futures price: RMB 172,980/tonne, down 3.91%
- Warrant inventories: Elevated levels relative to historical norms
- Lithium ore processing fees: Marginal increase
Research conclusions:
- Near-term price appreciation limited without new supply/demand surprises
- Inventory drawdown phase provides underlying support
- Cautious trading stance recommended, monitoring downstream demand and Jiangxi production resumption
- Ore supply conditions warrant close attention due to potential improvements
