Lithium Prices Plunge on EU-China Trade Deal Fears

• Lithium futures have fallen 14% this week.
• An EU-China trade deal may cut Chinese hybrid car exports to the EU by up to 50%.
• Lithium miners reported strong first-half profits driven by battery storage demand.

Lithium prices have slumped following a deal between the European Union and China that will cut Chinese hybrid car exports to the bloc. China's most actively traded lithium futures contract has dropped 14% since the start of the week. Hopes for expanded battery demand due to the Middle East oil crisis were dampened by the EU's protectionist measures against Chinese car imports. Oriental Securities analysts noted market participants' doubts about the lithium demand outlook, stating that while the deal is better than earlier pessimistic expectations of EU tariff hikes, it signifies a slowdown in China's export growth to the EU. The slide in lithium prices began earlier this year, with the contract briefly dipping below 100,000 yuan per ton earlier today, reflecting worries about demand. Despite this, lithium miners reported strong first-half profits, driven by increased demand for battery storage due to the Middle East war, which has highlighted the importance of battery storage for grids with significant wind and solar generation.