Lithium Salt lakes have changed, Australian mines have reduced production, and mines have risen again! Lithium ore supply and demand will reverse

Lithium Salt lakes have changed, Australian mines have reduced production, and mines have risen again! Lithium ore supply and demand will reverse?

In the short term, the downward exploration space is limited and the upward momentum is insufficient. The first round of car market "price war" in the new year has begun, and the market game will be more intense in the future. In the long run, with the continuous promotion of energy reform, the strategic position of lithium and other new energy mineral resources will continue to be highlighted.

Since the beginning of this year, lithium prices have maintained a weak operation as a whole, and spot prices have fallen below 100000 yuan/ton.

Although the price of lithium has declined, the strategic position of lithium resources has not changed. China, Japan, the United States, Europe, Australia and other countries have listed lithium as a strategic metal one after another.

According to public information, at present, in terms of overseas lithium resources, mature salt lakes are mainly distributed in the lithium triangle of South America, while most lithium mines are still concentrated in Australia. In terms of domestic lithium resources, lithium resources reserves in Qinghai, Tibet and Sichuan account for the vast majority of domestic lithium resources reserves. However, although China's lithium resources reserves are large, they are generally of low grade, poor natural conditions, strict environmental protection requirements and poor mining and utilization conditions.

Uncertainties in overseas supply have increased

However, with the change of salt lakes and the reduction of production in Australia, the uncertainties of overseas supply have increased recently.

According to foreign media reports, hundreds of people in northern Chile held protests on January 10 and blocked the Atacama salt beach passage, affecting the transportation of lithium mines. Sqm and Yabao of the United States both carry out lithium extraction projects from salt lakes locally.

According to public information, Atacama Salt Lake is the largest salt lake project in production in the world, and more than 90% of Chile's lithium resources are concentrated here.

Coincidentally, on January 5, core lithium, an Australian lithium producer, announced that in response to the continued downward price of lithium ore, the company would suspend the mining operation of its Finniss lithium project.

Unlike Atacama Salt Lake, the lithium concentrate production capacity of Finniss lithium project is not large, with a design capacity of 173000 tons per year. The first batch of lithium concentrate was produced in February 2023, and the company's original production guidance in fiscal year 2024 was 80000 to 90000 tons of lithium concentrate. At the same time, although the Finniss project stops mining lithium ore, it still has 280000 tons of lithium ore inventory, which has limited improvement in the global oversupply of lithium resources in 2024.

However, although the single project of Finniss project has little impact on the overall supply and demand of lithium resources, at present, the price of lithium carbonate has fallen below 100000 yuan/ton, and the price of lithium concentrate is about $1000/ton, which is in a low volatile state, approaching the cost line of some lithium mines and lithium salt producers. Under the current downward trend of lithium prices, the phenomenon of shutdown and production reduction of Australian mines will certainly be further expanded.

Long-term supply reduction may boost lithium prices

Will the reduction of lithium ore supply affect the trend of lithium price? According to the research reports of major institutions, the short-term impact is limited, but with the clearance of production capacity and the weakening of supply, in the long run, it is expected to boost lithium prices.

China Lithium High Tech Co., Ltd. believes that for lithium prices, under the background of further expansion of excess supply and demand in 2024, the gradual liquidation of production capacity will be an inevitable trend. For the supply impact of the two "giants", the agency believes that the shutdown of core lithium has a greater potential impact on the lithium supply side, mainly based on the general consensus of the market that the shutdown of Australian mines is a signal of the bottom of the downward price cycle and the shutdown of Finnis project, which shows signs of adjustment of sales strategy of Australian mines.

According to the analysis of China Lithium High Tech Co., Ltd. in the research report, looking forward to 2024, the active destocking of the demand side may gradually ease, but the supply of resources from tight to loose will be the general trend, which will drive lithium prices into a "grinding period" of downward shocks. From the cost curve, the downward price may gradually impact the marginal cost of the industry, and rebalance supply and demand in the medium and long term through the slowdown of capital expenditure and supply clearance.

China Lithium Hi Tech Co., Ltd. predicts that there will be a surplus of about 17% of global lithium salt production in 2024. If the production of Atacama Salt Lake in Chile is blocked for a long time due to the protests, it may lead to a significant reduction in the global supply side, or it will bring some support to lithium prices.

Galaxy Securities research report pointed out that in the last round of lithium industry downturn cycle, the bankruptcy and shutdown of Australian lithium mines baldhill, wodgina and Altura was a prerequisite for Industry reversal. The shutdown of Finniss lithium mine under the sharp decline in lithium prices also shows that the adjustment of lithium industry has entered a deep liquidation stage. Although the shutdown of lithium mine Finniss lithium mine has limited improvement on the global oversupply of lithium resources in 2024, the shutdown of lithium mines in Australia shows that the current round of lithium price decline has begun to break through the cost line of spodumene mining enterprises after first excluding the profits of nonmineral smelting enterprises. If the follow-up lithium price falls further, it is expected that more solid lithium mining enterprises will stop production or delay the progress of new production capacity, thus providing support for the bottom lithium price at the supply side contraction, And then complete the bottoming and liquidation of the industry.

CITIC Securities had also expected that due to the systematic rise in the production cost of lithium mines in Australia and the flexible production and marketing strategy of enterprises, the scale of production reduction and shutdown in Australia in this round did not rule out the possibility of further expansion. Lithium prices are expected to be supported at about 80000 yuan/ton, and there is limited room for subsequent decline in lithium prices.

Highlighting the autonomy and controllability of domestic lithium resources

Under the cycle of lithium price bottoming out, the investment value also began to emerge.

According to foreign media reports recently, Alexandre Baldy, chairman of BYD in South America, said that he had discussed supply agreements, joint ventures or acquisitions with sigma lithium, a lithium developer.

According to the data, sigma lithium is headquartered in Canada, and its wholly-owned subsidiary, sigma mineracao S.A., is developing the grota do cirilo spodumene project in Brazil. The project is the largest and highest grade hard rock project in the Americas, with a total resource of 3.032 million tons of LCE (1.45% lithium oxide).

Pilbara mining

In addition, on January 15, Pilbara mining, an Australian lithium producer, announced that the company had signed an amendment to the offtake agreement with Ganfeng lithium industry, a Chinese lithium salt giant, and its subsidiaries. Pilbara would increase the supply of spodumene concentrate to Ganfeng lithium industry from 160000 tons per year to 310000 tons per year in the next three years.

It is worth noting that policy factors such as lithium PEC in South America, nationalization of lithium mines in Chile, IRA act in the United States, ICA review in Canada and FIRB review in Australia are also increasing the costs and risks of overseas investment in mineral resources by domestic enterprises.

In this context, the autonomy and controllability of domestic lithium resources are highlighted.

Data from the Ministry of natural resources show that in recent years, China's lithium and other rare metal prospecting has achieved major breakthroughs in Western Sichuan, Kunlun, Arkin, Mufu mountain, Himalayan and other ore belts, and good progress has been made in increasing lithium reserves. According to the statistics of national mineral resources reserves, lithium reserves (converted lithium oxide) increased by 57% year-on-year in 2022. As of November 2023, the amount of lithium resources (converted into lithium oxide) reviewed and filed was 1500 tons.

In order to further promote lithium ore exploration and development and increase reserves and production, nearly 20 lithium ore blocks in Sichuan, Yunnan, Xinjiang and other provinces (regions) are actively carrying out preliminary preparations for transfer, and the source of blocks will be continuously expanded through various channels such as evaluation of prospecting target areas and submission of provincial natural resources authorities.

In addition, according to the previous incomplete statistics, in 2023, there were many investment and merger cases in the field of lithium mining in China, with investors from batteries, mineral resources, lithium salt and other fields, and even cross-border investors. For example, the robot company Hagong intelligence announced plans to acquire 70% equity of Dingxing mining and 49% equity of Xingli science and technology.

Some responsible persons of battery enterprises have mentioned that in terms of the speed of expansion, the fastest is automobile enterprises, followed by battery enterprises, and the slowest is mines, but if it is a mature factory with mining rights, the speed of expansion is relatively faster. The mismatch of production expansion cycle will profoundly affect market supply and demand.

At the same time, there are more uncertainties disturbing lithium prices. In the short term, the downward space is limited and the upward momentum is insufficient. The first round of car market "price war" in the new year has begun, and the market game will be more intense in the future. In the long run, with the continuous promotion of energy reform, the strategic position of lithium and other new energy mineral resources will continue to be highlighted. China's lithium extraction technology and cost have led the world, but it still has a long way to go to get rid of resource constraints. China Lithium Hi Tech Co., Ltd