Lithium carbonate: industry reshuffle, turning the tide (1)

1) Review of the Lithium Carbonate Market in 2024

1.1) Futures trend: maintain the bottom shock market

The price of lithium carbonate continued to bottom out during the year. The plate rebounded from the low of 85,000 yuan/ton at the end of last year to 125,000 yuan/ton, and then fell back again, once falling below the low of 68,000 yuan/ton. In the third quarter, monthly supply and demand improved slightly, and the inventory ushered in the inflection point. In October, the interest rate was cut, and the nest mine in the lower reaches of Ningde closed, and the plate remained weak. After entering November, the downstream output was better than the market expectation, the lower support becomes stronger, and the disk rebounded. At present, the disk is still fluctuating at 80000 yuan/ton. Trend market is still not clear, November's super-expected consumption performance makes the market worried about early overspending in December and the first quarter of next year's consumption. Consumption is not sustainable will lead to the market pessimism spread again, the existence of the low again back to explore the possibility. 

1.2) Spot market: Electrician price difference remains low

In the spot market, as of the end of November, the domestic price of battery-grade lithium carbonate was around 79,000 yuan/ton, and the average price of battery-grade lithium carbonate during the year was 92,000 yuan/ton; The current price of industrial-grade lithium carbonate is 76,000 yuan/ton, which is close to the average price of industrial-grade lithium carbonate of 87,000 yuan/ton during the year. During the year, the electric spread has been maintained at RMB 3,000/tonne - RMB 5,000/tonne for a long time, and for enterprises using industrial carbon to process electric carbon, the current spread can not cover the processing cost. 

2) Fundamentals: Global Supply and Demand Analysis

2.1) Supply: Overseas South America and Africa continue to provide incremental capacity

2024 some mines in Australia due to the continued low lithium salt prices appeared to stop production, production cuts, as of the end of October, Finiss, Cattlin, BaldHill, and the Pilbara's Nungaju have cut production cuts, but due to the year KathleenValley and Holland's commissioning to make up for the cuts in the loss of the cuts in the year, the year's total output was not significantly different from the beginning of the year. According to the production guidance of the mine in 2025, it can be seen that the growth rate of lithium resources in Australia has slowed down obviously. 

In 2025, the main growth of overseas lithium resources will still be in South America and Africa. Due to the cost advantage of South America's salt lakes and the fact that they are still in the cycle of capacity expansion, South America's salt lakes will still contribute nearly 100,000 tonnes of incremental lithium to the global lithium supply in 2025, while the production of Africa's Huayou and China Minmetals will reach capacity and expand, superimposed on the production of Mali's Goulamina project and the commissioning of Zimbabwe's Kamativi project. In the future, the incremental capacity will still be obvious, with a conservative estimation of 60,000 tonnes of incremental capacity.

2.2) supply: domestic mica mines stopped production and salt lakes provide the main incremental supply

According to SMM data, the current monthly smelting capacity of lithium carbonate in China is 113700 tons, which is nearly 40000 tons more than the same period of last year, among which the smelting capacity of spodumene is still the main part of the increase. Among them, the monthly smelting capacity of spodumene is 59200 tons, an increase of 29000 tons over the same period of last year, accounting for 52%; The smelting capacity of lepidolite is 35000 tons, an increase of 3000 tons year on year, accounting for 30.8%; The smelting capacity of salt lake was 19500 tons, an increase of 7200 tons over the same period of last year, accounting for 17.14%. It is not difficult to see that the total domestic production capacity is still increasing, but due to profit factors, Jiangxi mica smelting capacity has not increased in recent months, but has dropped significantly. The increase in domestic smelting capacity in 2025 will be mainly concentrated in salt lakes. The second phase of Zabuye Salt Lake is expected to be put into production with a capacity of 12,000 tons. The operating rate of Jiangxi mica smelting capacity will also depend on the profitability. 

2.3) demand: the growth rate of power batteries has slowed down

In September 2024, the global sales of new energy passenger cars reached 1.71 million, a year-on-year increase of 30% and a quarter-on-quarter increase of 19%. From January to September, the number of new energy passenger cars in the world reached 11.75 million, up 22% year-on-year. Regionally, the growth trend of China is strong, while the overall trend of new energy sources in markets outside China is weak. Among them, from January to September, the sales volume of new energy passenger cars in Europe were 2.05 million, down by 3% year-on-year; The sales volume of new energy passenger cars in North America was 1.25 million, an increase of 8% year-on-year, while the sales volume of new energy vehicles in the United States was 1.15 million, and the growth rate slowing down to 6%. The sales of new energy vehicles in Germany reached 409400 units, a year-on-year decrease of 20%.

From January to October, the production and sales of new energy vehicles reached 9.779 million and 9.75 million, respectively, up 33% and 33.9% year-on-year. The sales volume of new energy vehicles accounted for 39.6% of the total sales volume of new vehicles. Among them, the domestic sales volume was 8.692 million units, up 38.3% year-on-year; 1.058 million vehicles were exported, a year-on-year increase of 6.3. 

Global Look, 2024 SNE Research has released the latest statistics on global power battery installed capacity from January to September 2024. The data shows that the global power battery installed volume is close to 600GWh, specifically 599GWh, an increase of 23.4% year-on-year. Domestically, from January to October, China's cumulative production of power and other batteries was 847.5GWh, with a cumulative year-on-year growth of 38.3%. from January to October, China's cumulative power battery installed volume of 405.8GWh, with a cumulative year-on-year growth of 37.6%. Among them, the cumulative installed volume of ternary batteries 111.1GWh, accounting for 27.3% of the total installed volume, a cumulative year-on-year growth of 18.3%; lithium iron phosphate batteries cumulative installed volume of 294.5GWh, accounting for 72.6% of the total installed volume, a cumulative year-on-year growth of 46.7%.1-10 months, China's total cumulative export of power and energy storage batteries amounted to 115.7GWh, accounting for the cumulative sales volume of the first October 20.8%. Among them, the cumulative export of power battery 101.2GWh, accounting for 87.5%, a cumulative year-on-year growth of 105.4%; energy storage battery cumulative export of 14.5GWh, accounting for 12.5%.

2.4) demand: the growth rate of energy storage batteries exceeds expectations

According to data, from January to September 2024, the global output of energy storage batteries has exceeded 225 GWh. According to SMM data, the total output of energy storage batteries in China is expected to reach 290 GWh from January to November, and the monthly output has increased to 40 GWh. Since the third quarter, due to the favorable impact of domestic and foreign large-scale storage, manufacturers' shipments have significantly increased, corresponding to a significant increase in the purchase volume of battery cells. Top battery companies have an operating rate as high as 90%. After entering the fourth quarter, coupled with the year-end rush to install, the industry operating rate has also maintained a high level. Therefore, at the beginning of the year, we adjusted the global shipment of energy storage batteries in 2024. It is estimated that in 2024, the global energy storage battery shipments will reach 245 GWh, of which 230 GWh will come from China. We expect that the global shipment of lithium battery for energy storage will maintain a growth rate of 50% and reach 520 GWh by 2025. 

2.5) Global supply and demand analysis

Through the combing of global supply and demand, we have compiled a global supply and demand balance sheet of lithium resources, due to the current low prices, making enterprises in the resource side of the slowdown in the expansion of the consumer side of the power and the rapid growth of energy storage, the consumption of lithium resources to maintain a higher level of growth, the global lithium resources to maintain the pattern of excess supply in 2025, but the excess amount of significantly narrowed.

From the supply and demand point of view, 2025 still maintains the surplus, which means that high-cost production capacity needs to be further cleared. 2024 Australian Finiss, Marion, Pilbara and domestic Jiangxi mica mine and other high-cost production capacity have to leave the field action, in 2025, some of the projects still have capacity expansion plans, the production is expected to reach 1,380,000 tonnes, from the supply-demand balance sheet, there is still a 70,000 tonnes of surplus! Volume needs to be cleared, without taking into account the cost of production under the premise of inventory depletion, combined with the cost of mines to see, which means that the cost of more than 80,000 mines shut down in order to achieve a balance between supply and demand.