Inventory of lithium carbonate

Inventory of lithium carbonate

The inventory level of lithium carbonate is influenced by various factors, which directly affect the balance of market supply and demand. The following are some key influencing factors of lithium carbonate inventory levels:

Market demand: The market demand in the fields of electric vehicles, energy storage equipment, and renewable energy directly determines the consumption level of lithium carbonate. Strong market demand often leads to manufacturers and end users maintaining low inventory levels.

Production capacity: The production capacity and supply capacity of a manufacturer are important factors in inventory levels. The ability of manufacturers to meet market demand and adjust production in a short period of time directly affects changes in inventory.

Delay in the industrial chain: Due to the potential involvement of multiple links in the production process of lithium carbonate, such as lithium mining, extraction, and production of lithium carbonate, delays in the industrial chain can have an impact on inventory levels. Industry links with longer production cycles may lead to lagging inventory adjustments.

Global market price: The global market price of lithium carbonate will affect the profitability and production motivation of manufacturers. Higher prices may stimulate production, but they may also lead to inventory buildup. On the contrary, a price drop may slow down production, but inventory levels may be lower.

Raw material prices: The price fluctuations of lithium ore and other production raw materials can affect the production cost of lithium carbonate. The increase in raw material prices may lead to an increase in production costs and suppress the inventory backlog of manufacturers.

Government policies: The government's energy policies, environmental regulations, and trade policies will affect the production and circulation of lithium carbonate. The export quotas and tariff policies for lithium carbonate directly affect the changes in inventory levels in the supply chain.

International trade relations: Changes in international trade relations, such as trade wars and the signing of trade agreements, may have an impact on the international trade and inventory of lithium carbonate.

Technological innovation: The introduction of new technologies may change the production and application methods of lithium carbonate, thereby affecting inventory levels. For example, more efficient production technologies may reduce the need for inventory.

Financial factors: Changes in interest rates, monetary policy, and financial markets may affect the cost of funds and investment decisions, thereby affecting the inventory strategies of producers and traders.

Natural disasters and emergencies, such as earthquakes, fires, and political turmoil in mineral areas, may lead to production interruptions and have short-term and long-term impacts on inventory levels.

These factors work together to determine the level of lithium carbonate inventory. The changes in inventory levels have a direct impact on market supply and demand balance, price fluctuations, and industry development. Industry participants need to closely monitor the dynamics of these factors in order to better predict market trends and develop inventory management strategies.

Inventory cycle

According to SMM statistics, from July 2022 to March 2023, the inventory of lithium carbonate smelters was in a continuous accumulation process. In April, there was a turning point of destocking, and the total inventory of SMM lithium carbonate warehouse in April was 73800 physical tons; Among them, the inventory of smelters is 64600 physical tons, and downstream enterprises are 9182 physical tons. As of early December, the inventory of lithium carbonate was 61800 tons, including 37600 tons in smelters and 12500 tons in downstream enterprises. Structurally, the upstream inventory pressure is relatively high, while the midstream material factories maintain a safety stock of 4-7 days due to weak demand. Before the end of the year, there are basically no positive electrode factories choosing to replenish their inventory to compete for demand recovery.

The current situation of lithium carbonate

(1) Lithium salt manufacturers: under the greatest pressure, polarized

Entering the fourth quarter, the accelerating downward trend in lithium carbonate prices has caused widespread concern in the industry. When will it fall below the "threshold" of 100000 yuan/ton? Because this price is a lifeline for lithium salt manufacturers and the average cost price for various lithium extraction technologies in China. After falling below the limit twice in November and breaking below 110000 yuan on November 29th, all lithium carbonate futures contracts fell below the limit again on December 4th, breaking below 100000 yuan/ton.

Affected by this, since the beginning of this year, the performance of lithium extraction enterprises in Jiangxi Mica has generally been poor. For example, China Lithium Industry High tech Co., Ltd. suffered a loss of 95.5782 million yuan in the first three quarters of this year, making it one of the few listed lithium salt enterprises in China to experience losses.

Another leading enterprise, Jiuling Lithium Industry, also announced plans in November to reduce monthly lithium carbonate production by around 1500 tons; The company officially prepared for an IPO in the first half of the year and announced that it will raise 3.4 billion yuan to expand production.

Relatively speaking, the impact on salt lake lithium extraction technology enterprises is relatively weak. Data shows that although facing the dual pressure of product price decline and cost increase, companies such as China Lithium Industry High tech Co., Ltd. still have a considerable gross profit margin, and Zangge Mining's lithium carbonate products are as high as 81.97%, far from being comparable to peers.

(2) Material manufacturing end: gross profit declines, production expansion is hindered

In 2022, due to the rise in prices of lithium salts such as lithium carbonate and the increase in downstream demand, the prices of lithium battery positive electrode materials, negative electrode materials, and electrolytes have also risen significantly, and the performance of lithium battery material manufacturers is also quite impressive. However, this year, the sharp drop in lithium salt prices and the shrinking downstream demand have led to a corresponding decline in profits for lithium battery material manufacturers.

Data shows that in the first three quarters of this year, the leader of lithium iron phosphate, Defang Nano (SZ: 300769), has incurred a loss of about 1 billion yuan, equivalent to the company's net profit for the entire year of 2021; Longpan Technology (SH: 603906) incurred a loss of 654 million yuan, a year-on-year decrease of 250.97%; China Lithium High tech Co., Ltd. incurred a loss of 839 million yuan, a decrease of 269.79%. The change in market environment has also affected several companies to terminate/reduce their fundraising for lithium-ion battery material projects. For example, in September, Zhongyuan Corporation (SZ: 300018) withdrew its integrated construction project for high-performance lithium-ion battery negative electrode materials with an annual production capacity of 200000 tons; In November, Zhenhua New Materials (SH: 688707), an important supplier of CATL, also lowered the fundraising scale for one positive electrode material from the original 6 billion to 1.4 billion, less than a quarter of the original plan.

(3) Battery manufacturing end: Slow net profit growth and upward business expansion

When the price of lithium carbonate declines, due to the decrease in upstream raw material prices, the cost of lithium batteries also significantly decreases, creating space for lithium batteries to increase gross profit margins and increase profits. However, the price reduction of lithium carbonate is also like a double-edged sword. While it benefits battery manufacturers in reducing costs, it also gives them the strength to start a new round of "price war", and the prices of lithium batteries in the market continue to decline.

According to data recently released by Bloomberg New Energy Finance, global lithium-ion battery pack prices have fallen by 14% year-on-year this year, reaching a record low of $139 per kilowatt hour due to a combination of lower raw material prices and lower than industry expectations for demand growth. To salvage the declining profits, domestic battery manufacturers have taken various measures to extend their business upstream of the industry chain and accelerate the process of vertical integration. For example, Ningde Times is currently not only buying mines everywhere and extending its business to the upstream lithium mining process, but also involved in the midstream lithium battery materials process, even achieving coverage of the four main materials (positive electrode materials, negative electrode materials, separators, and electrolytes).

From the perspective of the entire lithium battery industry, the mutual extension of upstream and downstream links is more significant. Lithium salt manufacturers are also starting to extend their business to the downstream of the industry chain, such as China Lithium. Currently, the company has established lithium battery research and production bases in Xinyu, Dongguan, Ningbo and other places. At the same time, it plans to jointly invest in the construction of a lithium iron phosphate cathode material manufacturing project with Anda Technology.

Long term development prospects of lithium carbonate

Although the recent development of lithium carbonate is not optimistic, from a broader perspective, with the promotion of new energy, the prospects are still bright. The following are some possible trends and prospects for the future development of the lithium carbonate industry.

The electric vehicle and energy storage market drives demand growth: With the continuous pursuit of clean energy and sustainable development, the rapid development of the electric vehicle and energy storage market will continue to drive the growth of lithium carbonate demand. Lithium carbonate is the main raw material for lithium-ion batteries, which are the core components of electric vehicles and energy storage devices.

Expansion of the global battery industry chain: In order to reduce dependence on lithium ore, some countries and enterprises are striving to expand the battery industry chain, including increasing production of materials such as lithium carbonate. This may lead to a more diversified lithium carbonate industry chain, reducing dependence on a certain type of lithium mine.

Technological innovation promotes the improvement of production efficiency: In the production process of lithium carbonate, technological innovation is expected to improve production efficiency, reduce production costs, and make lithium carbonate more competitive. New extraction techniques and production processes may improve the production process of lithium carbonate.

The improvement of environmental standards: With increasing attention to environmental impact, lithium carbonate production enterprises may face higher environmental standards and responsibility requirements. This may drive the lithium carbonate industry towards a more environmentally friendly and sustainable direction.

New mineral development: Due to the increasing demand for lithium carbonate in the market, it may lead to the exploration and development of new lithium mineral resources. This may include the discovery and production of more hard rock lithium or salt lake deposits.

International trade and geopolitical influences: Changes in international trade relations and geopolitical factors may have an impact on the supply chain and prices of lithium carbonate. Trade wars, export tariffs, and other factors may bring uncertainty to the lithium carbonate market.

The development of renewable energy: With the continuous popularization of renewable energy, the demand for lithium carbonate may be enhanced. The demand for energy storage equipment will increase to balance the volatility of renewable energy and promote the development of the lithium carbonate market.

Consumer pursuit of clean energy: Consumer interest in environmental protection and clean energy is constantly increasing, which may lead to the expansion of the application of lithium carbonate in electronic products, electric tools, and other fields, thereby driving market demand.

These trends indicate that the lithium carbonate industry is expected to continue to maintain a growth trend in the future, but the specific development situation will depend on the comprehensive impact of multiple factors. Industry participants need to closely monitor market dynamics and flexibly adjust strategies to adapt to the constantly changing market environment.