(Yicai Global) May 15 -- The recent jump in the price of lithium carbonate in China will likely be fleeting, driven mainly by a supply shortage, according to industry insiders.

There has not been a significant recovery in demand for the raw material used in electric car batteries from the new energy vehicle market, they told Yicai Global.

In January, US electric vehicle maker Tesla sparked a price war in the world’s biggest auto market. As more than 40 Chinese and foreign carmakers cut the prices of their EVs, lithium carbonate prices began to fall as stocks of the material began to build up.

The average price rose to CNY242,000 (USD34,750) a ton on May 12 after ten consecutive price raises, an increase of 35.6 percent from a low of CNY178,500 in late April, according to statistics released by the Shanghai Nonferrous Metal Network.

The price will likely drop below CNY100,000 a ton, Wang Yu, chief executive of lithium battery maker Farasis Energy, told Yicai Global. Prices are high because of speculation, he added.

As oversupply increases, prices are expected to face more downward pressure in the next two years, and there is a risk that they will fall further after a temporary halt, a Citic Securities report said. 

Whether lithium carbonate prices stabilize depends on the destocking of power batteries and the recovery of market demand, according to Huaxi Securities.

Chinese car and battery giant BYD once pointed out that lithium carbonate accounts for more than half of a battery’s cost, so the metal’s price has a huger impact on NEV prices.

China’s NEV production and sales reached 2.3 million and 2.2 million units in the first four months of this year, both up 43 percent from a year earlier, according to data from the China Association of Automobile Manufacturers. The figures soared over 90 percent between January and April last year from the same period of 2021.

Editors: Shi Yi, Futura Costaglione