On April 13th, according to data from Shanghai Steel Union, the price of battery grade lithium carbonate fell by 4000 yuan per ton, with an average price of 195000 yuan per ton. This also means that in less than half a year, the market price of battery grade lithium carbonate has dropped from nearly 600000 yuan per ton to 200000 yuan, a drop of more than 60%. The decrease in lithium carbonate prices exceeded market expectations, reaching a new low in over a year, promoting the reduction of production costs for power batteries, energy storage, and other aspects, and marginal improvement in profitability in the middle and downstream links.

On the demand side, the growth rate has clearly slowed down significantly from 2021 to 2022, with major enterprises expanding their production capacity on a large scale, and many companies entering the fields of lithium ore investment and lithium carbonate production across industries. However, the appearance of rapid increase in lithium carbonate prices caused by market hoarding and speculation at that time masked the rapid growth of carbonate supply and even the actual situation of excess. On the demand side, although the sales of new energy vehicles from the end of last year to the first and second quarters of this year are still growing, the growth rate has clearly slowed down significantly. The slowdown in demand expectations has caused the rise in lithium carbonate prices to lose support. Furthermore, it is worth noting that the policy impact of the "Notice on Doing a Good Job in the Collaborative and Stable Development of the Lithium Ion Battery Industry Chain Supply Chain" issued in November last year has led to lithium carbonate being regarded as a national strategic resource to some extent, and its price speculation has been severely cracked down on. From a financial perspective, many hot money has already left the market. Subsequently, the lithium carbonate that had been stockpiled by various enterprises began to be released one after another, and as prices fell, the situation of selling, clearing warehouses, and actively lowering prices became increasingly apparent. This chain reaction has led to a continuous decline in the price of lithium carbonate.

On the cost side, it is beneficial for downstream automotive and energy storage enterprises to reduce the cost of lithium carbonate per ton from 600000 yuan to 300000 yuan, corresponding to a decrease of about 70000 yuan/ton in the cost of lithium iron phosphate cathode and 0.18 yuan/wh in the cost of battery cells. For an electric vehicle with a single battery capacity of 55kwh, the cost of the battery has decreased by about 10000 yuan. Coupled with the decline in material prices in other links, the cost of the battery has decreased. Against the backdrop of still high industry prosperity, with a strong expectation of lithium price decline, downstream demand in major areas is expected to further boost. If lithium carbonate prices continue to decline in the future, it will be beneficial for downstream car and energy storage companies to reduce costs and exchange price for volume.

| At the industry end, there may be a reshuffle. Many interviewed industry insiders also expect that with the falling price of lithium, lithium mining enterprises will be reshuffled, some small and medium-sized mining enterprises will withdraw from the market, and the industry concentration ratio will further improve in the future. From the perspective of the industrial chain, the previous phenomenon of downstream enterprises working for upstream will be reversed, and the profits of the industrial chain will be redistributed. In addition, according to data from the Power Battery Alliance, the market share of the top 5 industries in the first two months of 2023, including Ningde Times, BYD, China Innovation Airlines, Guoxuan High Tech, and Yiwei Lithium Energy, was 44%/34%/69%/49%/4%, respectively. Compared with the 48%/23%/7%/5%/2% in 2022, Longyi's position is relatively stable, and the market share of Long'er has significantly increased. As lithium prices continue to decline and accelerate industry price reductions, the industry landscape may face a reshuffle, and the importance of enterprise supply chain and capacity management will further highlight.

When will the price of lithium carbonate stop falling? Against the backdrop of high inventory in the industrial chain, many industry insiders interviewed believe that it is difficult to be optimistic about the short-term rebound in lithium carbonate prices. The current market demand lacks rebound momentum, and while the recovery cycle of demand in the terminal and downstream markets is not yet clear, the market will continue to have a strong supply and weak demand situation. In the short term, the current demand for lithium ore manufacturers can only reduce a portion of their inventory, but it is still not enough to solve the overall oversupply problem. The current performance of the industrial chain is relatively pessimistic, but it is worth noting that after experiencing a large-scale inventory reduction in the second round of the industrial chain in April, the inventory level of intermediate links mainly composed of battery cells and four main materials may fall to a low level. After the inventory of terminal car companies is effectively digested, downstream demand growth will achieve a faster upward transmission. Recently, top electrolyte companies are expected to have a net profit of 215 million yuan to 265 million yuan in the first quarter of 2023, a year-on-year decrease of 48.2% to 57.98%. The main reason for the decline in performance is due to lower than expected shipments of battery chemicals, combined with changes in the supply and demand relationship of the new energy vehicle industry chain, resulting in a significant year-on-year decrease in sales prices and a subsequent decrease in sales. When the price stabilizes depends on the market situation of lithium carbonate. The significant decline in lithium carbonate prices is actually a return to prices, and various links in the industrial chain should return to a reasonable profit range after market changes.