Annual inventory of lithium carbonate market in 2023- bustling 3000, losing to one finger of quicksand



Annual inventory of lithium carbonate market in 2023- bustling 3000, losing to one finger of quicksand

The price of lithium carbonate is 600000 RMB per ton, it comes and goes quickly

In 2023, the global supply and demand of lithium resources were relatively balanced. However, in the context of declining subsidies for new energy vehicles, destocking of the entire industry chain, and internal competition in downstream markets, coupled with speculative short selling by securities firms, the price of lithium carbonate continued to decline. In the continuous decline of lithium carbonate, many downstream enterprises have also changed their pricing model from M-1 to M, and inventory has been compressed from about a month to about 10 days, resulting in the basic loss of market water storage functions. Except for the brief rebound in downstream demand replenishment at the end of April, lithium salt production reduction and price increase at the end of September, and short selling of futures in early December, the market has experienced a very smooth decline. As of the end of 2023, the average price of domestic battery grade lithium carbonate was 232700 yuan/ton, a 52% decrease from 2022. At the end of the year, the mainstream price was slightly lower than the average price level in 2021.

In a market that is basically orderly competition (with a high proportion of long-term cooperation, high downstream concentration, and strong customer stickiness), downstream demand has increased by 20%, but prices have suffered a cliff like decline, clearly exceeding the scope of supply and demand. If we insist on "kidnapping" the macro level, it would be beneficial for car and energy storage companies to reduce costs, grab profits from overseas lithium mining companies, reshape the pricing power of the lithium carbonate market, accelerate the clearance of upstream high cost production capacity, and finally succeed in "serving the national air mine". It depends on whether you believe it or not.

Figure 1: Domestic lithium carbonate price trend from 2021 to 2023

After a severe heat stroke, it is necessary to have a severe cold, which is a rule.

640 (1).jpg

Production growth below expectations

According to data from China Lithium Industry High tech Co., Ltd., the domestic production of lithium carbonate in 2023 was approximately 477000 tons, a year-on-year increase of 28%, a significant decline from 2022, and a decrease of 50-60000 tons from the expected increase at the beginning of the year. From the perspective of different raw materials, spodumene still contributed the most to the domestic lithium carbonate production in 2023, accounting for 55% of the newly added production, which is basically consistent with the significant increase in the number of imported lithium mines; Domestic lithium mica, due to environmental protection rectification and manufacturer losses and reduced production, has experienced less than expected growth, accounting for 30% of the newly added production; The new major projects in Salt Lake are relatively limited, and the climb is also relatively slow. The production continues to steadily advance, accounting for about 15% of the new production. Including imported lithium carbonate, China's dependence on overseas lithium resources is still over 60%.

Figure 2: Domestic production of lithium carbonate from 2021 to 2023

Figure 3: Domestic production of lithium carbonate from 2021 to 2023 (by raw materials)

The correct direction is not something that cannot be changed once it is determined, but can be adjusted at any time.

New projects are developing towards large-scale and integrated development

According to statistics from China Lithium Industry High tech Co., Ltd., the domestic lithium carbonate production capacity reached 835000 tons (excluding recycling) in 2023, a year-on-year increase of 51.54%. However, due to the continuous decline in the market, as well as factors such as raw material supply, environmental impact assessment approval, and corporate profits and losses, many new projects have not been put into mass production, resulting in low capacity utilization.

In the past few years, many domestic enterprises have made cross-border investments in lithium salt projects of around 10000 tons, most of which are due to the lack of raw material channels and stable customers. But this year, with the sharp drop in prices, this blind pursuit of hot spot investment has significantly decreased. Instead, some leading enterprises in the industrial chain are expanding or improving their industrial chain layout in a countercyclical manner, with many projects reaching the scale of 30000 to 60000 tons. The trend towards large-scale development is obvious, which helps enterprises achieve economies of scale and increase market share.

At the same time, while investing in lithium salt projects, many enterprises are also synchronously laying out upstream raw material supply, pursuing an integrated model of "own lithium mines+lithium salt production". The lithium salt projects of Ningde, Guoxuan, and Keliyuan in Jiangxi are equipped with lithium mica mines, while the Huayou Guangxi project is connected to lithium mines invested in Africa. Some small enterprises are also positioned for contract manufacturing. The integration of the industrial chain helps enterprises improve operational efficiency, reduce costs and increase efficiency, and enhance their ability to survive the winter.

Figure 4: Ranking of domestic lithium carbonate production capacity in 2023

To establish a foothold in new energy, standing still is not enough. You must know how to move forward and backward freely.

Limited room for further decline in 2024

According to data from China Lithium Industry High tech Co., Ltd., the global lithium resource supply is expected to be around 1.3 million tons (LCE) in 2024, with overall supply exceeding demand. However, downstream demand will still maintain a growth rate of at least 15-20%. If we want to meet the demand for 1.03 to 1.06 million tons (LCE), 85000 yuan will be a strong support line for the lithium carbonate market, and there is limited room for further decline in lithium carbonate prices. According to incomplete statistics, over 90% of the futures market currently belongs to financial capital, and the participation of physical enterprises is not high. Some traders have already engaged in hedging or spot trading, while some capital management companies under futures companies are waiting for opportunities to intervene in futures trading. In 2024, more "buyers" will enter the market.

Figure 5: Global Lithium Carbonate Cost Comparison in 2023

According to China Lithium Industry High tech Co., Ltd., the C1 cost range of 80000-85000 yuan gathers nearly 300000 tons of lithium carbonate production capacity. Once it falls below the 80000 yuan C1 cost line, combined with the high cost production capacity that has already been cleared in the early stage, it will affect nearly 35% of lithium resource production capacity, only able to meet downstream demand of about 850000 tons (LCE), and there will be a supply-demand mismatch at that time.

If there is no significant positive news, it is expected that the domestic spot price of lithium carbonate will fluctuate between 80000 and 150000 yuan in 2024, with an average price of around 110000 yuan; Under the influence of extreme emotions, the futures market may fall below 70000 yuan for a short period of time, and there will also be significant room for imagination when it rises