Lithium price searching for the bottom, lithium enterprises waiting for spring｜2024-The Great Review

Lithium price searching for the bottom, lithium enterprises waiting for spring｜2024-The Great Review

After the price dive in 2023, the lithium salt operating space narrowed significantly in 2024, basically oscillating in the range of 70, 000-110, 000 yuan per tonne throughout the year. The lithium index, which is almost the same frequency as the price, failed to rebound in 2024 after a year and a half of continuous decline. Even after the '924 market 'has been repaired, if you look at a longer timeline, as of 24 December, the lithium index fell more than 13% during the year, and the relevant stocks are woeful.

Prices continues to fall. The most direct impact is that the income and net profit of lithium salt enterprises generally drop sharply, or even lose money. Facing the cycle of bottoming out, lithium enterprises are more cautious in capital expenditure, reducing cost and improving efficiency. The "cat winter" in the form of key costs, improving the self-sufficiency rate of lithium resources, extend the industrial chain, and binding upstream and downstream has become the priority choice of most enterprises.

However, the above-mentioned status quo can not be completely reversed in a short period of time. With the expansion of production projects that have been put into production by lithium enterprises in previous years, the market oversupply in 2025 will remain the key word.

Although supported by new energy vehicles, energy storage solid-state batteries and other applications and cost, the downward space of lithium price is limited, but it is also very difficult to move up. People in the industry generally believes that the low-level shock is a high probability event next year, and the estimated price range is 70,000-100,000 yuan/ton. 

1) Bottom of lithium price under oversupply

According to statistics, there are 20 A-share lithium mining stocks, of which 16 have a year-on-year decline in revenue in the first three quarters, and Tianqi Lithium Industry and Weiling Shares have a decline of over 50%; 13 net profit decreased year-on-year, Tibet City Investment and Tianqi Lithium Industry decreased by more than 100%, and 5 mineral resources and others decreased by more than 50%; Six companies, including the lithium industry, suffered losses.

As expected, the performance of lithium battery business in the fourth quarter is still difficult to improve, and annual performance was under pressure.

The core factor affecting performance is the downward fluctuation of lithium salt price. According to Shanghai non-ferrous network data, 2024 year-to-date, battery-grade lithium carbonate prices fell from 113,000 yuan/tonne to 72,300 yuan/tonne, lithium hydroxide prices fell from 100,000 yuan/tonne to 66,900 yuan/tonne, the annual average price of 90,700 yuan/tonne and 81,900 yuan/tonne, respectively.

The futures market also continued to fluctuate at a low level, basically replicating the price trend of lithium salt. As of December 25th, the contract of lithium carbonate 2501 closed at 74,760/tonne yuan/ton. 

The key to low price of lithium is that the supply exceeds demand. In the past few years, driven by the explosive growth of the new energy industry and the large-scale expansion of the upstream and downstream of the industrial chain, the expansion of lithium salt ended. Due to the environmental assessment, production line construction, and other slow progress, the global lithium salt supply pattern for many projects in 2024 and 2025 continued to be relaxed.

For example, Lion town's Kathleen Valley Lithium Project went into production in mid-2024, with a planned annual production capacity of 3 million tonnes of raw ore (equivalent to about 500,000 tonnes of SC 6 concentrate); The first phase of Goulamina lithium feldspar project of Ganfeng Lithium Industry in Mali, Africa was put into operation on December 15th, 2024, with an annual output of 506,000 tons of lithium concentrate; Salt Lake is also stepping up its integrated project of annual output of 40,000 tons of lithium salt.

Focus on the domestic, starting in June this year, the raw material end of the supply of mica production discharge, ore end of the smelter supply is also gradually increased, the import side of the amount of lithium carbonate imported from South America is also gradually increased, superimposed on the head of the battery factory began to increase the proportion of customer supply, downstream for the bulk of the single procurement of the demand is again weaker, the fundamentals of the supply of strong demand is weak, the price of lithium carbonate gradually fell to seventy thousand near.

'From January to July, 2024, the monthly cumulative import of lithium concentrate exceeded 540000 tons. As of July 31,2024, the average monthly import price of lithium concentrate is 856 USD/ton.' Xu Yongqi, chief of metal new materials of Huaan Securities, also pointed out that from July 2023, the average import price of lithium concentrate showed an obvious downward trend, which is a clear reflection of the mismatch between supply and demand.

Data from the Ministry of Industry and Information Technology shows that from January to October, the output of battery-grade lithium carbonate was 540,000 tons, a year-on-year increase of 43%; Compared to the same period, the total output of lithium batteries from January to October was 890 GWh, up 16% year-on-year. The supply of lithium carbonate continues to exceed the growth of downstream demand. 

2) Extend the chain, deduct costs, bind upstream and downstream

In fact, the fluctuation of lithium price not only affect the profits of upstream materials enterprises, but also has great constraints on the core of the downstream industry chain and even automobiles. In view of this, the government, the industry and the enterprise are launching a variety of initiatives used to hedge lithium price fluctuations brought about by the impact of the typical such as the introduction of lithium carbonate futures, signed long-term orders, and new times push rebate mechanism.

It is worth mentioning that recently, the Sichuan Provincial Economic and Information Office and other 9 departments jointly issued a 'lithium industry project evaluation to promote high-quality development of the implementation of the program (for trial implementation) of the notice ',taking the lead in the domestic innovation and the introduction of the first evaluation of the lithium industry projects for the lithium industry, a special policy program. The scheme has established a comprehensive evaluation, grading, dynamic management and precise policy evaluation system with quality and multiplication as the core and high-quality development of lithium industry projects as the focus, aimed at effectively coping with the structural and cyclical overcapacity risks of lithium industry.

Focus on the upstream lithium enterprises, extended chain, binding upstream and downstream, key costs to become a common choice, in anticipation of getting through the 'winter ',keep to the arrival of the next cycle. 

The lithium salt industry is a typical cycle industry, and it is also the battlefield of the cost game. When the cycle comes up, the cost determines how much you earn, but at the bottom of the cycle, it is a big wave of life and death. Therefore, by the end of 2024, reducing cost and improving efficiency will become the themes of this industry.

After Bijita Mine, a subsidiary of China Mineral Resources, was put into production, the spodumene concentrate produced can meet the raw material demand of 66,000 tons/year battery-grade lithium salt of our company. In the latest research records, the company said, "In the third quarter of 2024, the production and sales of the company's own mines increased substantially, with a total sales of 11,114 tons of lithium salt, and the total sales of its own mines in the first three quarters reached about 28,000 tons. The recovery rate of the company-owned Bikita mine continued to improve, and production costs continued to decline. '

In addition, Ganfeng Lithium Industry is also striving to improve the self-sufficiency rate of resources. The company said that the self-sufficiency rate of resources should be greatly improved in the past two years, mainly due to the gradual release of Cauchari-Olaroz, Goulamina and Mariana projects. It is expected that from next year, most of the lithium resources of the company will come from projects it holds or is interested in.

As far as Salt Lake is concerned, it has even implemented cost reductions for the 40,000 tons/year basic lithium salt integration project being promoted. The initial investment of the project is estimated to be 7.098 billion yuan. In 2023, by optimizing the process routes, increasing the pretreatment process of old brine and streamlining process equipment, an investment optimization rate has been about 14.58%; In 2024, during the project implementation stage, the company will further realize the centralization of materials and equipment by optimizing the allocation of water, electricity and gas, optimizing the main steel structure, and relying on the advantages of resource integration of the general contracting institute and large-scale procurement, which is expected to further save about 11.3% of investment. 

3) Looking ahead

The good news is that with the rapid decline in lithium prices in the second half of the year, high-cost mines represented by Australian mines are facing severe pressure. Except for the Green bushes mine, other Australian mines are generally in a state of full-cost loss, and some mines have announced plans to stop production.

According to the combing of Huaan Securities, Australia Finniss mine has planned to suspend production, some salt lake projects in Argentina and China have also announced the delay of production. Pilbara Minerals (PLS) announced the production of spodumene concentrates in the fiscal year 2025 is expected to be lowered by 100,000 tonnes, Mt Cattlin, Lion town and other mines are also lowering their production expectations.

It is expected that the whole industry will continue to show signs of production reduction or production stoppage. Combined with the cost distribution of the industry, the current price of lithium carbonate is strongly supported at 75,000 yuan/ton, and the price of lithium initially bottomed out.

It is also very difficult for lithium price to rise, and the high probability is a continuation of the weak oscillation, because it is widely expected in the industry that the supply of lithium salt will still exceed the demand in 2025.

In terms of supply and demand, the supply and demand of lithium salt is expected to maintain a double growth of terminal new energy vehicles in 2025, and energy storage batteries are still the main areas of demand growth. The downstream materials products of lithium salt are expected to maintain sales and production, and the demand for lithium carbonate is expected to maintain a growth of about 20%. On the supply side, with the development of lithium resources at home and abroad, the release of lithium carbonate capacity is accelerated and concentrated. In 2025, the supply of lithium salt is expected to remain loose, and the pattern of supply exceeding demand is expected to be maintained throughout the year. In this process, high cost of raw material and the increased losses of raw material mining enterprises will further weaken the performance of subsequent construction, and the market supply is expected to focus on raw material self-sufficiency, low-priced raw material processing and imports.