Strong year expected for China's vehicle market, EV sales to support lithium - S&P Global

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Highlights

China's vehicle sales tipped to grow 4% in 2021

NEV growth to support lithium prices

Singapore — China's vehicle sales are forecast to exceed 26 million units in 2021, up 4% from a year earlier, as vehicle consumption picks up in tandem with the country's economic recovery, with electric vehicle, or EV sales tipped to rise by 40% from a year earlier, the China Association of Automobile Manufacturers, or CAAM, said on Jan. 13.

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The positive outlook for vehicle sales will lend support to domestic demand for steel, aluminum and copper for vehicle production in 2021, but might not necessarily generate significant additional demand for these metals, market sources said.

China's domestic vehicle output and sales in 2020 totaled 25.23 million and 25.31 million units, respectively, down 2% and 1.9% from a year ago, which was within expectations, CAAM said. Despite the adverse impact of the coronavirus, the decrease was just 5.5 and 6.3 percentage points lower than in 2019, as the country released a package of stimulus policies to boost vehicle consumption.

Meanwhile, the association warned the supply shortage of car chips might impact vehicle production.

China's commercial vehicle output and sales reached 5.23 million and 5.13 million units in 2020, up 20% and 18.7% from a year earlier, both marking a record high. The significant increase was attributed to the elimination of national III emissions standards and boost in infrastructure construction.

China's primary aluminum output is expected to increase in 2021, driven by high profit margins, according to the S&P Global Platts China Alumina & Aluminum Outlook published earlier this month.

Aluminum will remain profitable for Chinese smelters in coming years as prices are expected to hover at prevailing highs despite pressure from increasing supply and a slight decline in apparent consumption. Alumina prices are unlikely to see any significant increase, the Outlook found.

China's vehicle sales rose 2.1% month on month and 6.4% year on year to 2.83 million units in Dec. 2020, which was the highest level since Dec. 2017, CAAM data showed. Meanwhile, vehicle output rose 5.7% from a year ago but decreased 0.3% from a month earlier to 2.84 million units.

Positive outlook on EV sales to support lithium prices

China's lithium carbonate prices are expected to rise in 2021 as demand from domestic cathode materials producers will increase thanks to the positive outlook on electric vehicle sales.

China's new energy vehicle output and sales came up to 1.37 million units respectively in 2020, up 7.5% and 10.9% from a year earlier, CAAM data showed.

China's EV sales might reach 1.8 million units in 2021, up 40% from a year earlier, Xu Haidong, the deputy chief engineer of CAAM estimated. The confidence in EV sales should be attributed to stable economic growth, continuous stimulus policies on vehicle consumption and the sales promotion of manufacturers, he added.

Meanwhile, the loading volume for China's power battery totaled 63.6 Gwh in 2020, up 2.3% from a year earlier, according to separate data released by the China Automobile Power Battery Industry Innovation Alliance.

Chinese domestic lithium carbonate prices started 2021 with another large jump to a 16-month high, boosted by limited availability amid robust demand. Platts assessed battery grade lithium carbonate up Yuan 6,000/mt on Jan. 8 to Yuan 60,000/mt ($9,275/mt), while lithium hydroxide was assessed Yuan 1,000/mt higher to Yuan 53,000/mt. Both assessments are on a delivered, duty paid China basis.

Lithium carbonate prices are now at their highest level since Sep. 6, 2019, having gained Yuan 20,000/mt since the recent intermittent stop-start uptick began in early September 2020 and are now Yuan 12,000/ mt higher than a year ago.

A Chinese researcher expected that domestic lithium carbonate prices might increase by 20%-30% this year thanks to the positive outlook of EV production and sales.

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