Global lithium mines report of 2024

Global lithium mines report of 2024

Under the imbalance of industrial supply and demand and the continuous impact of prices, the global lithium mining industry has inevitably shown signs of a major retreat.  

First, let's look at a set of data: according to the data of CLPC china lithium products technology Co., Ltd , in the 38th week of 2024 (2024.09.14-2024.09.20), the domestic market transaction price range of battery-grade lithium carbonate (99.5%) was 73,500-75,500 yuan/ton, with an average market price of 74,500 yuan/ton, which was the same as the previous week's price, but decreased by about 59.20% compared to the same period last year, and decreased by about 23.12% compared to the beginning of the year. 

According to the statistics of 24th tide industry research institute (TTIR), the total revenue of "lithium products" related business of 13 listed companies in the first half of 2024 was 28.69 billion yuan, down 56.88% year on year. The overall gross profit margin of "lithium products" was 24.27%, down 28.65 percentage points year on year. Even the lithium mining giants Ganfeng and Tianqi Lithium also experienced a significant decline. See the table below for details: 

In addition, according to the statistics of CLPC china lithium products technology Co., Ltd Securities and other third-party institutions, the inventory of lithium carbonate in the hands of lithium mining enterprises in 24Q2 was as high as 82,800 tons, a significant increase of 52.99% compared to 24Q1; The operating rates of lithium carbonate in June, July and August 2024 were 63.71%, 49.66% and 47.42% respectively, showing a significant downward trend. (Note: The operating rate is an estimated figure) 

 Under such industrial trends, the wave of production stoppages/reductions has swept the global lithium mining industry. 

 The main reduction in overseas markets comes from the South American salt lake lithium extraction project and high-cost lithium mining projects, such as the formal shutdown of Core Lithium's Finniss lithium project, Arcadium Lithium's plan to shut down the Australian Mt Cattlin lithium mine, and a significant slowdown in the expansion plan of the South American salt lake region. 

Domestically, Ningde Times decided to suspend its lithium mica business in Jiangxi on September 10. UBS previously analyzed that the cash cost of Ningde Times' lithium business is about 89,000 yuan per ton (including tax). According to institutional data, the spot price of lithium carbonate has been below Ningde Times' cost line since mid-July 2024. After two consecutive months of losses in the lithium business, and with the lithium price still under pressure and falling, the suspension of Ningde Times' lithium business in Jiangxi will lead to a reduction of 8% in China's monthly production of lithium carbonate, equivalent to a reduction of 5,000-6,000 tons of lithium carbonate equivalent (LCE) per month. 

 On September 11, CLPC china lithium products technology Co., Ltd also issued a notice that its holding subsidiary company, CLPC china lithium products technology Co., Ltd  (mine), would carry out a 15-day production suspension and maintenance work, while its wholly-owned subsidiary,CLPC china lithium products technology Co., Ltd  (mineral processing plant), would carry out a 10-day production suspension and maintenance work. The production halt and maintenance of CLPC china lithium products technology Co., Ltd  is expected to affect the production of lithium carbonate by 1,500 tons equivalent. 

 According to statistics from Minmetals Securities, lithium mining companies in 24Q2 paid a total of 6.98 billion yuan in cash for the purchase of fixed assets, intangible assets, and other long-term assets, a year-on-year decrease of 17.3%. 

 A series of data are supporting that the global lithium mine has officially entered a period of deep adjustment. 

 Looking back at the previous round of lithium cycle, the lithium price fell below 70,000 yuan/ton in July 2019 and entered a deep adjustment stage. By the beginning of 2020, the demand for downstream power batteries exploded, and in December 2020, the price rose to over 50,000 yuan/ton. The entire process lasted about 17 months, and then began to rise rapidly. During this period, a large number of core mines have undergone adjustments, including the lower-cost Greenbushes, SQM/ALB-Atacama, and Cauchari-Olaroz, which have also experienced project delays and minor production cuts. 

If we observe the evolution of lithium prices over the past decade from a longer perspective, we can see that it has undergone multiple rounds of "bull and bear" cycles, and each round of changes has had a profound impact on the industry landscape. The reason is almost caused by the dramatic changes in supply and demand, that is, once the market supply and demand relationship changes, the price will certainly react quickly in reality, which is the power of the cycle. 

 The reason for this round of cycle adjustment is that the supply and demand structure of the lithium industry has undergone a fundamental change since 2023. Specifically, while funds have been pouring into the upstream to accelerate capacity release, the demand in the downstream has not increased simultaneously, resulting in the entire lithium industry chain being in a state of overcapacity, which in turn intensifies the industry's internal friction and the new energy industry faces a brutal reshuffle. Therefore, almost unanimous expectations have led to the market's inability to resist the decline in lithium prices. 

 The short-term market fluctuations in lithium prices are almost impossible to predict, but the long-term trend must still depend on changes in supply and demand. This article aims to discuss the issue of "the further decline space of lithium price and the starting point of the next bull market" with readers through the collation and analysis of future supply and demand data. It is intended to stimulate discussion and is for reference only. Readers are also welcome to provide additional information, corrections, and even criticism. 

 According to the data of Antaike, the global lithium resource development volume in 2023 is about 1.05 million tons of LCE (lithium carbonate equivalent, the same below), an increase of 40% year on year. Among them, Australia's production is 380,000 tons of LCE (accounting for 36.2%), South America's salt lake production is 260,000 tons of LCE (accounting for 24.8%), China's production is 230,000 tons of LCE (accounting for 21.9%), and Africa's production is 50,000 tons of LCE (accounting for 4.7%). 

 Previously, some high-cost Australian mines have announced production cuts. According to Antaike's statistics, the production of Finniss, Greenbushes, Cattlin, Wodgina and other projects has declined as expected, and the overall production of Australia in Q1 has declined by about 12.3% compared to the previous quarter. The reduction in production of Australian mines in the first half of the year was mainly due to the constraints of a small portion of high-cost production capacity. Reducing costs and increasing efficiency will become the main direction for Australian mines, and it has not had much impact on the current situation of oversupply. 

 However, on the contrary, the progress of African mines in production is relatively optimistic. In the first half of the year, most Chinese-funded mines in Zimbabwe and Nigeria have been successfully promoted. Huayou Cobalt, China Mineral Resources, Shengxin Lithium Energy and other self-owned overseas concentrate resources have gradually been shipped back to domestic factories, with a monthly import volume of about 100,000 tons. 

 According to Antaike, the production of lithium concentrate in Africa will exceed 1 million tons in 2024, equivalent to about 160,000 tons of lithium carbonate. In 2025, the production of lithium concentrate may reach more than 2 million tons, equivalent to nearly 300,000 tons of lithium carbonate. Africa has surpassed Brazil to become the second largest source of spodumene import after Australia. 

 In addition, according to the statistics of the Minmetals Securities Research Institute, it is expected that the global new lithium resource capacity will increase by 1.0419 million tons of LCE from 2024 to 2026, mainly in China and Argentina's salt lakes: low-cost salt lake resources in Argentina and China will gradually be put into production from 2024 to 2026. 

 In fact, the production capacity of South American salt lakes is accelerating in the past 24 years, and SQM's production capacity is expected to increase to 240,000 tons within the year, with a production guidance of 210,000-220,000 tons for the whole year. It is expected to still contribute the largest increase in South American single projects; Ganfeng Lithium's Cauchari-Olaroz Salt Lake has been put into production, and its lithium carbonate production capacity is expected to increase to 40,000 tons after the middle of the year, with a target annual output of 20,000-25,000 tons. 

At present, the largest production is still in the Atacama salt lake of ALB and SQM in Chile, but the increase is more from Argentina. Companies including Ganfeng Lithium, Zijin Mining, Arcadium, Eramet, etc. have all made layouts in Argentina, and will be put into production in 2024, which will bring a large increase. Four new lithium mines in Argentina will be put into production in the second half of 2024, which will greatly increase Argentina's annual lithium production capacity by 79% to 202,000 tons. 

 According to Antaike's statistics, Chile and Argentina will produce 233,000 tons and 45,000 tons of LCE in 2023, and are expected to produce 250,000 tons and 104,000 tons of LCE in 2024, representing year-on-year growth of 7% and 131%. 

 Recently, the U.S. Bureau of Land Management (BLM) announced that it has cleared one of the last regulatory hurdles for the Rhyolite Ridge lithium project in Nevada, which is owned by emerging lithium boron producer Ioneer (ASX: INR). This progress marks that the lithium project is about to enter the substantive development stage. The Rhyolite Ridge lithium mine project is located about 225 miles (362 kilometers) north of Las Vegas and is one of the largest lithium mines in North America. According to the plan previously disclosed by Iioneer, once the mine is fully put into production, it will meet the battery production needs of nearly 370,000 electric vehicles per year. 

 Looking at the domestic market, the domestic salt lake lithium extraction project is also constantly advancing. Tibet Mining said that its Zabuye Phase II lithium carbonate project has begun trial production, which will add 9,600 tons/year of battery-grade lithium carbonate and 2,400 tons/year of industrial-grade lithium carbonate. In addition, the Chaerhan Salt Lake project of Lanpec Technologies with an annual output of 20,000 tons of LCE will be put into production in the second half of the year. It is expected that the company's lithium carbonate production will be about 40,000 tons in 2024. According to statistics from Antai Technology, it is expected that the domestic salt lake production will increase to 135,000 tons of LCE in 2024, a year-on-year increase of 18.4%. 

 Based on the above analysis, in this round of investment cycle of lithium mines, the capital expenditure stimulated by the upward price will be realized gradually. The author believes that 2024-2025 will be the period of concentrated release of global lithium ore (including brine) production capacity, during which new projects in South America, Africa and China will be put into production and will continue to contribute to more incremental growth. Especially, the supply increase in 2023 is weaker than expected at the end of 2022, and this part of production capacity will also be released in 2024-2025. 

 Under the neutral expectation, Antai Technology predicts that the global lithium resource will increase by 350,000 tons of LCE in 2024, which is still higher than the consumption increase of 14 tons of LCE in that year, and the excess amount will be about 250,000 tons of LCE in 2024. (Appendix at the end of the article: Global distribution map of major lithium resources) 

 At present, power batteries (including new energy vehicles and two-wheeled vehicles) and energy storage batteries account for about 70% of lithium resource consumption, which are also the two areas with the largest demand for lithium resources in the future. Grasping the demand changes in these two areas will almost grasp the direction and trend of future lithium prices. 

 In terms of the current overall pattern, the demand for lithium in power batteries still occupies an absolute position. In the major global markets, new energy vehicles in the three major regions of China, Europe and America account for the vast majority of the market. China's domestic sales account for more than 60% of global sales, followed by Europe with nearly 20% and the US market with about 10%. However, it is almost an industry consensus that the growth rate of new energy vehicles will slow down in the future. 

 According to CLPC china lithium products technology Co., Ltd  data, from January to June 2024, both the European and American markets fell short of expectations. The sales volume of new energy vehicles in the European market was 1.182 million, down 14% year on year; According to the European Automobile Manufacturers Association, the sales of all-electric vehicles in the European Union fell by 43.9% year on year in August, marking the fourth consecutive month of decline. Among them, the largest markets for all-electric vehicles in the European Union, Germany and France, fell by 68.8% and 33.1% respectively. In addition, the registration of plug-in electric vehicles in the 27 member states of the European Union fell by 22.3%. 

 According to the statistics of the American Automobile Industry Association, the sales of new energy vehicles in the United States in August was 148,000, up 9.7% year on year. From January to August, the sales of new energy vehicles in the United States was 1.044 million, up 8.4% year on year, with a significant decline in growth rate compared with the same period last year. 

 Further analysis of the reasons shows that since 2023, many European countries have tightened their subsidy policies for new energy vehicles, which, coupled with the impact of rising raw material prices, is one of the core reasons for the significant slowdown in the growth rate of new energy vehicle sales; The US domestic car companies continue to cut spending on electric vehicles, and the delay of new models is serious, which also leads to the weak growth of the US market. 

 Looking at the domestic market, data from the China Passenger Car Association shows that the total retail sales of new energy vehicles from January to August reached 6.009 million units, an increase of 35.8% year on year. It is worth noting that the market penetration rate of new energy vehicles in July and August has exceeded the 50% mark, with August's rate climbing to 54%. 

 The Minmetals Economic Research Institute believes that the penetration rate of new energy vehicles in China has reached 25.6% in 2022. If the growth rate of 100% is maintained every year, the penetration rate will reach 100% in 2024; If the annual growth rate drops to 50%, it will achieve 100% penetration in 2026. A more reasonable and realistic development trend is that the growth rate is declining, and the decline in growth rate is not contradictory to the accelerated penetration. 

 In particular, due to geopolitical and trade protection reasons, the export of new energy vehicles in China is severely restricted. According to the statistics of the China Association of Automobile Manufacturers (CAAM), from January to August 2024, the export of new energy vehicles was 818,000, a year-on-year increase of 12.6%, while the growth rate in the same period last year was about 82%. 

 As Europe and the United States have imposed tariffs or prohibited cooperation on Chinese automobile and battery exports, creating numerous obstacles to hinder Chinese companies from competing abroad, it is anticipated that there will continue to be pressure on subsequent exports. 

 The latest news is that on September 13, the US government issued a statement confirming that it will implement the 301 tariff policy against China starting from September 27, 2024, and significantly raise the import tariffs on Chinese products, including a 100% tariff on electric vehicles and a 25% tariff on power lithium batteries used in new energy vehicles. Lithium-ion batteries for non-electric vehicles will be subject to a 25% tariff starting from January 1, 2026. 

In fact, in 2024, an unprecedented large ebb tide is sweeping the lithium battery market. For example, according to the data of the China Passenger Car Association, the loading rate of power batteries from 2020 to 2023 was 76%, 70%, 54% and 50% respectively, with a very obvious downward trend. Especially in 2024, the loading rate of power batteries in the first half of the year fell below the 50% mark for the first time to 47%. 

At the same time, the high inventory scale is accelerating the reshuffle and game process of the power battery industry. According to SMM's previous report, as of the end of December 2023, China's power battery inventory was about 130.4GWh; The China Automotive Power Battery Industry Innovation Alliance shows that from January to July 2024, the cumulative sales volume of power batteries in China was 380.3GWh, while the cumulative installed capacity of power batteries in China was 244.9GWh, leaving a gap of 135.4GWh between the two. 

 According to the statistics of "Wall Street Insights·Jianzhi Research", the accumulated inventory of power batteries in the first seven months of this year has reached 276.9GWh, including 199.5GWh of lithium iron phosphate batteries and 125.6GWh of ternary lithium batteries. 

 Currently (September 13), the price of ternary square power batteries is about 0.46 yuan/Wh, and the price of lithium iron phosphate square power batteries is 0.37 yuan/Wh, both of which have decreased by 0.01 yuan/Wh compared to the end of June. At present, the price has fallen below the cost line of many second- and third-tier manufacturers, and it is almost an industry consensus that many companies may not survive this round of reshuffle. 

 As global attention to carbon emissions intensifies and carbon neutrality strategies continue to be strengthened, the traditional fossil fuel energy system is rapidly transforming towards a structure centered on clean and low-carbon renewable energy. In this context, the energy storage field has shown unprecedented growth momentum. Energy storage has become the fastest growing area in 2023, and it is the second largest demand industry in the downstream of lithium, accounting for about 15%. 

Based on data from EV Tank, Yivie Economic Research Institute, and CLPC china lithium products technology Co., Ltd  Information, the global shipment of energy storage batteries in the first half of 2024 reached 130GWh, representing a year-on-year increase of 35%. However, this growth rate is approximately 38.4 percentage points lower than that of the same period in 2023. 

 The decline in energy storage batteries in the first half of 2024 is mainly related to the slowdown in growth in overseas markets. The European market is still digesting inventory, the installation progress in the US market has been delayed, and other emerging markets have limited contribution to demand. Overall, overseas energy storage demand remains sluggish. In the second quarter, after experiencing the stage of destocking in the early stage, the demand for household energy storage in Europe has rebounded. However, some regions in Europe still face the challenges of the gradual cancellation of subsidy policies and low electricity prices. Therefore, the demand for household energy storage market remains relatively stable without the support of obvious favorable policies; As the second largest market in the world, the power market in the United States is already quite mature, so the installation of energy storage mainly depends on market drivers. Last year, the North American energy storage market was affected by factors such as the federal government's interest rate hikes and the extended delivery cycle of certain energy storage components (such as transformers), resulting in a slowdown in growth. 

 According to the White Paper on the Development of China's Lithium-ion Battery Industry (2024) CLPC china lithium products technology Co., Ltd  jointly released by research institute EVTank and Ivy Economic Research Institute, in 2023, the global lithium-ion battery shipments totaled 1202.6GWh, a year-on-year increase of 25.6%, which has shown a significant decline compared to 2022. From the perspective of shipment structure, in 2023, the global shipment of automotive power batteries (EV LIB) was 865.2GWh, up 26.5% year on year; The shipment of energy storage battery (ESS LIB) was 224.2GWh, a year-on-year increase of 40.7%. Based on historical data, it is assumed that the growth rate of energy storage batteries will remain at 40% in the next two years, and the growth rate of power batteries will remain at 25%. By 2025, the shipments of power and energy storage batteries will be as follows: 

As shown in the table above, in 2024, the shipment of energy storage will be about 29% of the power battery. The rapid growth of energy storage will have a certain pulling effect on lithium demand, but it still cannot quickly drive a significant increase in lithium demand in the short term. From a long-term perspective, the rapid growth of energy storage in the future will be an important engine to drive the increase in lithium demand, which we may see after 2025. 

 In summary, the slowdown in the growth trend of lithium battery industry demand in 2024 is a high probability event.  CLPC china lithium products technology Co., Ltd At present, against the backdrop of the consensus expectation of excess capacity in the entire market, we believe that the clearance of some high-cost mining capacity is the only way for prices to bottom out. However, at present, large-scale production cuts and suspensions have not yet occurred, and the road to bottoming out lithium prices is still long. 

 Data released by CLPC china lithium products technology Co., Ltd shows that since mid-April this year, the weekly inventory of lithium carbonate has entered a rapid accumulation state, with more than 3,000 tons accumulated weekly from May to June, and more than 4,000 tons accumulated weekly in July. The pace of inventory accumulation slowed down in August, but the current inventory of over 130,000 tons still brought significant pressure to the lithium industry to reduce inventory. Looking at the development trend and changes in the industry, the lower cost boundary of lithium carbonate has important reference significance for medium-term price changes and even for reshaping the industrial landscape. 

Specifically, according to the lithium cost price curve, the cash cost of extracting lithium from salt lakes is the most competitive, with its cost at the leftmost end of the curve. The cost of extracting lithium from most salt lakes is in the range of 30,000-50,000 yuan/ton; Secondly, the cost of high-quality spodumene mining is about 40,000-60,000 yuan/ton, followed by high-quality lepidolite mining, which costs roughly 60,000-80,000 yuan/ton; The mining cost of African resources is relatively high, mainly due to the high cost of energy and transportation, estimated to be between 70,000 and 110,000 yuan per ton. Although the current cost range is high, with the improvement of supporting facilities and transportation infrastructure, these costs may still be further reduced; Relatively speaking, low-quality lepidolite projects face the highest cost pressure, with cash costs exceeding 120,000 yuan/ton. 

 At present, the price of lithium carbonate has broken through the support of the average cost of African mines, and even touched the cost support of some lepidolite mines and traditional Australian mines. Based on the announcements of Australian mining companies from 23Q3 to 24Q1, each mining company has achieved significant cost reduction by prioritizing the development of rich ore. However, there is limited room for further cost reduction. If lithium prices continue to fall, it will be necessary to consider whether Australian mines can achieve cost support. 

In summary, there is no significant contraction in the upstream resource sector at present. Overseas Australian mines announced a reduction in production at the beginning of the year, but so far it has only restricted high-cost projects. However, the salt lake will not reduce production due to its cost advantage, and the integrated production enterprise still has a long way to go before reaching the break-even point. Currently, the serious cost inversion of external mining and low-grade lithium extraction enterprises will gradually lead to production suspension, but it will have limited impact on the supply scale. 

According to the prediction of Hehe Futures, the annual lithium supply forecast (2024) will be revised down from 1.289 million tons to 1.187 million tons, and the excess supply forecast will be revised down from 147,000 tons to 73,000 tons. Although the supply increase forecast is revised down, it is expected that the inertia of supply release will make it difficult to alleviate the global lithium supply surplus situation in 2025-2026. 

In the short term, the supply of lithium carbonate will continue to be in excess in September, and high inventory will exert greater pressure on the spot market, reflecting the contradiction between supply and demand. The overall trend is still in the process of shocking and bottoming out. 

In the medium and long term, we expect that the road to bottoming out will be relatively long, and it will still take time for high-cost projects to be gradually cleared. With the recovery of demand, especially if the rapid growth of the energy storage sector drives the release of lithium demand in the future, it will be possible for the supply and demand balance to reach a new turning point, and lithium prices may stabilize and rise. We expect that the next upswing cycle of lithium prices may occur after 2025.