2024 global Lithium Resource Supply Review: Cost as Shield, Demand as Anchor, Lithium Price Bottom Range Approaching

Dec,04,24

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Lithium has the characteristics of the largest electrochemical equivalent and high resource abundance, and plays an important strategic role in the energy field. Lithium is a metal element, with a density of 0.53 g/cm 3, a melting point of 180.5℃, a boiling point of 1347.0℃, an electrical conductivity of 11.2 and an electrochemical equivalent of 2.98 a h/g. Lithium is the lightest metal in the world with the strongest electrochemical equivalence, and has the characteristics of high oxygen density. Covering an area of 0.0065% and ranking 27th in abundance, it is one of the important strategic energy resources. The upstream supply of lithium is diversified, and the long-term supply is stable. The upstream supply of lithium resources mainly comes from salt lakes (brines), spodumene and lepidolite, and other lithium minerals, such as lithium clay and lithium feldspar, are extracted less. The three main lithium resources have their own advantages, among which spodumene has a high grade, salt lake has a large reserves and lepidolite has a low cost. The downstream demand of lithium is strong, and it is widely used in many fields. In the traditional industries such as glass manufacturing and medical care, where the demand is relatively stable, lithium resources can improve product performance or increase social benefits. For example, industrial lithium carbonate can enhance the strength and toughness of glass, while high-purity lithium carbonate is beneficial to treat some special mental diseases. In the rapidly developing new energy field, lithium resources can be used to prepare cathode materials, cathode materials, electrolytes, etc., and form lithium batteries with high energy density, which has become the mainstream technical route. 

1)Lithium resource reserves: Lithium resource reserves are mostly distributed in the Americas and Australia, with domestic mining imports being the main source

The world is rich in lithium resources, and there is great exploration potential in many areas. According to data of US Geological Survey (USGS), in 2022, the global lithium reserves will reach 26 million tons of lithium metal (equivalent to more than 100 million tons of lithium carbonate), and global lithium resources will reach 98 million tons of lithium metal. However, it is estimated that the global demand for lithium carbonate will be only 669,000 tons in 2022, which indicates that global lithium reserves are extremely abundant at present. From 2018 to 2022, the world's proven lithium reserves and resources increased steadily, and the global lithium resource gauge is much higher than the lithium reserves. Many areas have great potential for exploration and reserve growth. The global distribution of lithium resources is relatively concentrated, covering America and Australia. Lithium resources will be mainly distributed in Chile, Australia, Argentina, China and the United States in 2022. The sum of the five countries' lithium reserves accounts for more than 80%, and the proportion of resources is close to 60%. The distribution of lithium resources is concentrated. Bolivia has the largest exploration potential, with lithium resources reaching 21 million tons and lithium reserves below 3.3 million tons; The exploration potential of Argentina and the United States is huge. Argentina has proven its lithium reserves of 2.7 million tons and its resource of 20 million tons, while the United States has proven its lithium reserves of 1 million tons and its resource of 12 million tons. 

The domestic consumption accounts for the largest proportion of lithium resources, while the production accounts for a relatively small proportion. According to the data of USGS, in 2022, the consumption of lithium resources in China was 505000 tons, accounting for 81% of the global total, while its output was 100000 tons, accounting for only 15% of the global total. For many years, China has been the largest consumer of lithium resource in the world, but its output of lithium resource still accounts for a low proportion in the world, resulting in a significant supply gap. The domestic lithium mining industry relies heavily on imports and external sources. In addition, the downstream demand is soaring, the upstream supply is tight, and the development and utilization of new lithium mines takes a relatively long time. At present, domestic lithium mine resources are highly dependent on imports, and the external dependence is as high as 70% or more. Most of the imports come from Australia, accounting for 92% in 2022, and a few come from Brazil, Zimbabwe and other regions.

Domestic lithium resources are mainly distributed in Jiangxi and other four provinces, mainly including spodumene, salt lake and lepidolite. In 2022, the domestic lithium resource reserves were 6,352,700 tons of lithium oxide, which were mainly distributed in Jiangxi, Qinghai, Sichuan and Tibet provinces, while Henan, Xinjiang and other provinces were omitted from production. There are three types of lithium resources in China, namely salt lakes, spodumene and lepidolite. Salt Lake is mainly distributed in Tibet and Qinghai; Spodumene is mainly distributed in the Sichuan; Lepidolite is mainly distributed in the Jiangxi province. The sources of lithium resources in China are diverse, with different grade, reserves and other factors. In 2021, the proportion of domestic salt lakes, spodumene and lepidolite was 82%, 11% and 7% respectively. Among them, the salt lakes have the lowest grade, about 0.003-0.097%, and the largest reserve are about 5.21 million tons, mainly including Chaerhan Salt Lake and Dongtai Jiner Salt Lake; The highest grade of spodumene is about 1.03-1.63%, and its reserves are relatively small, about 700000 tons, mainly including the Jianxiawo mining area and Huashan porcelain stone mine; The grade of lepidolite is about 0.28-1.00%, and the minimum reserve is about 440000 tons, mainly consisting of Lijiagou spodumene ore and methyl card 134 vein. 

2) Lithium price cycle: the rising and falling cycles usually lasts for 2-3 years, which is equivalent to the supply release cycle.

The rapid growth of electric vehicles in the world has led to the reorganization of lithium resource demand. Before 2015, lithium was mainly used in traditional industries such as glass and ceramics, and industrial grade lithium carbonate accounted for 70-80% of the total demand for lithium carbonate. Since 2015, due to policy subsidies, the sales of new energy vehicles have accelerated, and the demand for power batteries has been increasing, which has led to the reorganization of the lithium demand side. The industry has ushered in demand growth opportunities for more than ten years, and battery-grade lithium carbonate accounts for more than 80% of total demand.

It takes at least 2-3 years for the lithium resource project to start and put into production, and it takes longer for the salt lakes. The average construction time for spodumene mine projects is over one and a half years, and the average start-up time is about 9 months. It may take a little shorter for mature projects to expand production. The average construction time of Lithium Salt Lake Project is about 4 years, and the crawling production time is about 2 years. Salt lake projects using traditional precipitation methods need a relatively long time. The cycle of lithium price fluctuation is usually 2-3 years, which is equivalent to the supply and release cycle. Since 2015, the price of lithium has experienced two big cycles. The first cycle (2015 -2019): In early 2015, the demand for power batteries began to erupt. In the beginning of price increases, the production of salt lakes in South America was reduced, and in the end of price increases, new production capacity on the supply side gradually began to be put into production, but large-scale supply had not yet been formed. The price of lithium began to rise from 30,000 yuan to 40000 yuan, and reached the peak of 170000 yuan in 2017; Later, due to the decline in subsidies in 2018, demand declined and supply was concentrated, resulting in a decline in lithium prices. Later, several mines in Australia went bankrupt due to reduced production, which led to the price of lithium falling back to about 50000 thousand yuan. Second cycle (from the second half of 2020 to present): the global consumption of new energy vehicles is recovering, and the initial increase in supply is mainly due to the improvement of the utilization rate of mature resource. In the late period of price increase, new capacity has been put into production, but the actual supply increment is still limited. The price of lithium began to rise from 40 thousand yuan, and the sales of electric vehicle continued to exceed expectations in 21-22 years. In November 2022, lithium carbonate reached a peak of nearly 600 thousand yuan; Later, due to the gradual release of lithium minerals from overseas, the price of lithium began to fall. Coupled with the impact of the industry-wide destocking caused by falling lithium prices, lithium carbonate fell below 100,000 yuan by the end of 2023. From the perspective of the lithium price cycle, the rhythm of supply and release determines the duration of the lithium price cycle, and the rising and falling cycles often last for 2-3 years, which is equivalent to the cycle time of increasing supply released by lithium resource projects. 

3) Price outlook: new projects are put into production one after another, and the supply side being the core price variable for 24 years

In 2023, the industry's destocking exceeded expectations, and the demand side disturbance caused the industry's price to fluctuate greatly. It is estimated that the industry inventory will remain low for 24 years, and the demand side is expected to maintain a steady growth of around 20%. The new supply released by lithium miners will become the main factor affecting prices.