Global lithium mines have officially entered a period of deep adjustment

In the industry, the imbalance between supply and demand and the continuous impact of prices, the global lithium mine lake will inevitably show signs of a big retreat.

First of all, look at a set of data: according to Baichuan Yingfu data, the 38th week of 2024 (2024.09.14-2024.09.20) domestic battery-grade lithium carbonate (99.5%) market price range of 73,500-755,000 yuan/ton, the average market price of 74,500 yuan/ton, compared with the previous week's price is flat, but compared to the same period last year about 59.20%, compared with the beginning of about decreased by 23.12%. 

According to (TTIR) statistics, in the first half of 2024, the total income of "lithium products" related business of 28.690 listed companies was 28.69 billion yuan, down by 56.88% year-on-year, and the gross profit margin of "lithium products" as a whole was 24.27%, down by 28.65 percentage points year-on-year. It dropped by 28.65 percentage points. 

In addition, according to the statistics of third-party organizations such as SMM, Baichuan Fu Ying and Huabao Securities, the inventory of lithium carbonate in the hands of lithium mining enterprises is as high as 82,800 tons, which is 52.99% higher than that of 24 Q 1; In 2024, the production power of lithium carbonate was 63.71%, 49.66% and 47.42%, respectively, showing an obvious downward trend.

Under such an industrial trend, a wave of production stoppage/reduction swept the world's lithium mines.

Overseas market, the main reduction from the South American salt lake lithium project and high-cost lithium mining projects, such as Core Lithium's Finniss lithium project officially shut down, Arcadium Lithium plans to shut down the Mt Cattlin lithium mine in Australia and significantly slow down the expansion plan of the South American salt lake area.

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

According to the data of Minmetals Securities, the cash payments of fixed assets, intangible assets and other long-term assets purchased by Lithium Mining Company in 24 Q 2 totaled 6.98 billion yuan, down by 17.3% year-on-year.

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

Looking back at the last round of the lithium mining cycle, in July 2019, the price of lithium fell below 70,000 yuan/ton, and entered the stage of deep adjustment. By the beginning of 2020, the demand for downstream power batteries broke out, and in December 2020, it rose by more than 50,000 yuan/ton. The whole process lasted for about 17 months, and then it began to rise rapidly. During this period, a large number of core mines have undergone adjustments, including lower-cost green shrubs, and projects in SQM/ALB-Atacama and Cauchari-Olaroz have also been postponed, with a slight decrease in output. 

If we look at it from a longer period, the evolution of lithium prices in the past ten years has experienced several rounds of "bull-bear" cycles, and each round of cycle changes has had a far-reaching impact on the industrial structure. The reason for this situation is almost always caused by drastic changes in the relationship between supply and demand. That is to say, once the relationship between supply and demand in the market changes, the price will definitely respond quickly in reality. This is the power of the cycle.

The reason for this round of cycle adjustment is still due to the supply and demand structure of the lithium industry since 2023 has undergone a fundamental transformation, specifically, the capital to enter the upstream in a big way to accelerate the release of production capacity, the downstream demand has not been synchronized growth, resulting in the entire lithium industry chain being caught in the state of overcapacity, which in turn exacerbates the industry's implosion, and the new energy industry is facing a brutal reshuffle, so the nearly unanimous expectations have led to the market on the the decline in lithium prices have no resistance.

Short-term market fluctuations of lithium prices is almost unpredictable, but the long-term trend certainly depends on changes of supply and demand.