Lithium carbonate plummets, leading to the collapse of the lithium battery industry chain

Battery grade lithium carbonate is an important raw material for manufacturing new energy lithium batteries, mainly used as a positive electrode material for lithium iron phosphate, lithium cobalt oxide, and some ternary lithium materials.

The imbalance between supply and demand remains the core reason for the current decline in lithium carbonate prices.

The continuous realization on the supply side coupled with the slowdown in the growth rate of terminal vehicles has led to the accumulation of lithium carbonate inventory, 

resulting in a continuous decline in prices, "Liu Xiaomin, a lithium raw material analyst at Fubao New Energy, told Interface News.

On the demand side, domestic new energy vehicles have entered the off-season of consumption, and the growth rate of demand has slowed down. 

In addition, the sluggish overseas new energy vehicle market and the imposition of tariffs on Chinese electric vehicles by countries and regions such as Europe and America will be detrimental to China's electric vehicle exports.

On the supply side, Caixin Futures research points out that most lithium salt factories are currently maintaining active production and the supply is constantly increasing.

In fact, the current price of lithium carbonate has already hit the cost bottom line of lithium mining companies. 

Tianqi Lithium mentioned in the announcement that in the first half of 2024, the market price of chemical grade lithium concentrate will decrease.

 With the gradual storage of low-priced lithium concentrate newly purchased from Talison and the gradual digestion of existing lithium concentrate inventory,

 the cost of chemical grade lithium concentrate outbound from each production base of the company will gradually approach the latest purchase price.

 The phased mismatch of lithium concentrate pricing mechanism will also gradually weaken, and the company's losses in the second quarter of 2024 will decrease month on month.

An insider from a lithium battery company said, "We don't expect to see any signs of a rebound in the price of lithium carbonate in the short term. 

In fact, our company has a small profit margin based on cash costs, but if we calculate based on full process costs, we are already in a loss making state.

 Currently, the company will control production based on prices internally, while reducing costs and increasing efficiency internally.

 However, from the perspective of market production, the company's production capacity is not large, and we cannot control prices

In addition to the price of lithium carbonate, the performance of some companies is also dragged down by investment in lithium mineral resources.

According to Tianqi Lithium's announcement,

 its important joint venture SQM disclosed in its first quarter 2024 performance report that the Santiago de Chile court ruled on its tax litigation for the 2017 and 2018 tax years in April 2024, 

overturning the tax and customs court's ruling on the case on November 7, 2022, 

resulting in the confirmation of approximately $1.1 billion in income tax expenses and a corresponding reduction in net profit of approximately $1.1 billion.

 In addition, according to Bloomberg's forecast data, combined with SQM's disclosed performance in the first quarter of 2024, its semi annual performance is expected to decline significantly year-on-year.

 Therefore, Tianqi Lithium confirmed a significant decrease in investment income from SQM in the first half of the year compared to the same period last year.

Keda Manufacturing, which also obtained lithium mineral resources through equity participation, has also been affected by the related resource tax issues of its equity participation company Lanke Lithium.

Keda Manufacturing (600499. SH) mentioned in its performance forecast for the first half of 2024 that due to the fact that the controlling shareholder of Lanke Lithium, Salt Lake Co., Ltd., 

needs to make up for the resource tax on the development of natural brine resources, Salt Lake Co., Ltd.

 needs Lanke Lithium to adjust the value-added tax rate for the salt field and brine extraction system maintenance fees paid to it from 2021 to 2023 from 6% to 13%;

 At the same time, it retrospectively adjusted the sales price of lithium brine for Lanke Lithium Industry from 2021 to 2022 using the pricing method of lithium brine in 2023, 

and recorded the adjusted difference in the purchase cost of brine of 581 million yuan (including tax) to the first half of 2024.

As of press time, Salt Lake Corporation has not responded to the above matter to reporters.

 A person from Keda Manufacturing told reporters over the phone that Lanke Lithium is its joint venture, and Keda Manufacturing only confirms investment returns and does not directly participate in operations. 

Based on the above situation, it is expected that the performance achieved by Lanke Lithium will significantly decrease by more than 80% compared to the same period last year. 

At present, the above-mentioned related party transactions have not been approved by the board of directors and shareholders' meeting of Lanke Lithium, 

and it cannot be ruled out that Salt Lake Corporation will forcibly confirm and transfer the relevant expenses of Lanke Lithium. 

The above incident has not yet reached a final conclusion, and the company has collaborated with lawyers to promptly sort out the relevant legal and regulatory foundations involved in implementing the proposal.

It is not difficult to find in the performance forecasts of multiple lithium mining companies that one of the reasons for their declining performance or even turning from profit to loss is the price of lithium carbonate.

The reporter noticed that since 2024, the price of battery grade lithium carbonate has fallen to the price range of 90000 yuan to 120000 yuan/ton. 

After a wide fluctuation in the first quarter, the fluctuation range of lithium carbonate narrowed in April, with 110000 yuan/ton as the price center, gradually stabilizing. 

Since mid May, the decline in lithium prices has been difficult to stop. From mid May to mid June, the price of lithium carbonate has dropped from 110000 yuan/ton to 100000 yuan/ton.

At the beginning of July, the SMM battery grade lithium carbonate index was 90600 yuan/ton; Battery grade lithium carbonate costs 88400 yuan to 93100 yuan/ton, with an average price of 90700 yuan/ton;

 Industrial grade lithium carbonate ranges from 85000 yuan to 86700 yuan/ton, with an average price of 85900 yuan/ton.

 From the demand of positive electrode factories, according to preliminary statistical results, the production schedule of lithium iron phosphate in July is expected to be the same as that in June, 

while the production schedule of ternary materials in July is expected to increase by about 10% compared to June. 

According to data from the Battery Industry Innovation Alliance, from 2021 to 2023,

 the growth rate of battery production in the second half of the year compared to the first half reached 94.1%, 62.3%, and 59.8%, respectively.