Haitong Futures: Large Drop in LC Due to News Disruptions, Reduced Possibility of Explosive Price Movements Under Multiple Constraints

We believe the overall major trend remains upward. The A-share crackdown on the lithium mining sector has nothing to do with whether companies’ earnings are strong or weak. Market logic needs to be adjusted. In the short term, sentiment before the holiday will generally be weaker; after the holiday, lithium-mining stocks may once again see a rebound. The gap above will be filled next time.

Theoretically, in the short term, the contradiction between near- and far-month pricing in lithium carbonate futures is expected to be corrected. The author has asked mining companies and battery manufacturers, who generally expect lithium prices to rise. In the industry, spot trading is concentrated in near-month contracts, which makes far-month pricing, to a certain extent, ineffective. When positions are shifted between near- and far-month contracts, the expected gap in far-end supply-and-demand dynamics is likely to become apparent.

Currently, the pace of destocking in the weekly lithium carbonate inventory is slowing; in April, the balance state of “no-closure/no-rebalancing” is expected to continue. The subsequent development of the far-end “Jianxiawo” and “Zimbabwe” will affect the direction of lithium prices. There is a systemic mismatch between the market’s narrative of supply-and-demand being loosely balanced and the reality of the industry’s rigid supply contraction, demand continuing to exceed expectations, and new technologies reshaping the ceiling for lithium demand. (Haitong Futures)