Lithium Carbonate Futures Report 12.4: Falling below the 100,000 mark, lithium carbonate has not yet bottomed out!

Golden10 Data ·  12/04/2023 15:48

The Jinshi Futures App launched a special report on lithium carbonate futures, focusing on tracking the relevant data, fundamentals and future performance of the lithium carbonate futures market.

[Today's major lithium carbonate market events]

1. Miao Yu, former minister of the Ministry of Industry and Information Technology: The goal of a penetration rate of more than 50% for new energy vehicles may be achieved ten years ahead of schedule

Recently, Miao Wei, member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference, Deputy Director of the Economic Committee, and former Minister of Industry and Information Technology, stated at the 18th China Automobile Industry Forum in 2023 that the total volume and structure of the Chinese automobile market are undergoing profound changes, and the development of the intelligent connected vehicle industry will be a sign of successful transformation. However, there are still many issues that require careful planning on how to develop smart cars. Miao Wei believes that the trend of new energy vehicles replacing traditional fuel vehicles has taken shape. The original target of more than 50% of new energy vehicles in 2035 is likely to be achieved ahead of schedule from 2025 to 2026 at the latest.

2. Changan Automobile: Prototype battery design for new batteries such as lithium-sulfur batteries and metal batteries is being carried out

Changan Automobile's recent investor relations activity record table shows that in terms of new batteries, prototype battery designs for new batteries such as lithium-sulfur batteries and metal batteries are being carried out. It is expected that the energy density will exceed 1,300-1500 Wh/kg, and it will strive to achieve on-board application in 2035.

3. US: Vehicles must not contain key raw materials for batteries extracted and processed by sensitive foreign entities

<通胀削减法案>On December 1, local time, the US government issued “Guidelines for Sensitive Foreign Entities”. The guidelines suggest that starting in 2024, vehicles containing any battery modules manufactured or assembled by sensitive foreign entities will not be eligible for tax credits provided by the Inflation Reduction Act. By 2025, the regulation will also be extended to key minerals such as lithium, cobalt, and nickel needed in battery manufacturing, that is, vehicles cannot contain key raw materials for batteries extracted and processed by sensitive foreign entities, otherwise they will not be able to enjoy tax credits. Foreign sensitive entities include individuals owned, controlled, governed, or directed by the governments of China, Russia, North Korea, and Iran. According to the guidelines, all companies incorporated in China or in which the Chinese government holds 25% or more of their shares will be treated as foreign sensitive entities. If 25% of a company's board seats, voting rights, or shares are held by a sensitive entity, the company will also be considered a sensitive entity.

[Lithium Carbonate Futures Industry Chain at a Glance]

According to Guangqi's report, the position of lithium carbonate in the industrial chain can be roughly shown in the following figure:

In the upper reaches of the lithium industry chain, lithium resources in the form of lithium ore or salt lake brine are extracted, and various forms of products such as lithium salt (such as lithium carbonate, lithium hydroxide, lithium chloride), secondary/multiple lithium salts (such as lithium fluoride, lithium bromide), and lithium metal are produced through separate processing at each stage.

The midstream of the lithium carbonate industry chain mainly reprocesses primary lithium carbonate products produced from salt lake brine or lithium ore, and then produces battery-grade lithium carbonate and other lithium products. At present, since primary lithium carbonate reprocessing technology is very mature, lithium mine smelters can basically complete the entire process of producing battery-grade lithium carbonate from lithium ore. Most of the products of lithium extraction companies in salt lake are industrial-grade lithium carbonate due to purification technology, cost considerations, etc., while downstream cathode materials companies will entrust processing companies to purify and remove impurities according to product needs.

In the downstream of the industry chain, lithium carbonate is mainly used to manufacture cathode materials for lithium batteries, and can also be used in various products such as electrolyte solutes, glass, ceramics, air conditioning refrigerants, and rare earth electrolytic additives.

[Lithium Carbonate Production Characteristics]

According to a report by Guang Shi,

1. The lithium carbonate production cycle is seasonal: from January to February, domestic salt lake production generally fell 30-40% due to factors such as the freezing of the Qinghai salt lake, routine equipment maintenance by enterprises, and the Spring Festival holiday. As the temperature rose after March, lithium carbonate production rebounded rapidly until the operating rate peaked in June. After July, lithium carbonate production declined slightly due to high temperature power restrictions in summer, but production remained high until December.

2. The lithium carbonate production increase cycle is long: exploration and development of raw materials for lithium resources is the foundation for increasing lithium carbonate production capacity. The development of new mines and new salt lakes requires the following five steps: exploration, research, mining rights approval, production plant construction, and production capacity growth. The first three steps are preliminary preparation stages. The approval process for different resource types and countries varies greatly, and the time is uncertain. Generally speaking, it takes about 2 to 3 years to build a new spodumene and lepidocite smelter, and another 1 to 2 years for production capacity to climb to full production; the entire process of building a new lithium extraction plant in Salt Lake takes 5 to 7 years. In contrast, it only takes 6-10 months for downstream lithium carbonate cathode materials companies to expand production.

[Factors influencing the price of lithium carbonate futures]

According to a report by Guangqi, the factors affecting the price of lithium carbonate can be discussed from various perspectives such as supply, demand, and cost.

1. Supply: including four aspects, including raw material supply, capacity utilization rate and release of new production capacity, lithium carbonate import volume, and inventory situation

Raw material supply: Whether the supply of raw materials such as spodumene, lepidomite, and brine is sufficient is the main influencing factor in the supply of lithium carbonate, and its changes will directly affect the production of lithium carbonate. Most of China's spodumene is imported. The main influencing factors include the rate at which overseas lithium mining companies release capacity and factors affecting imports such as the epidemic.

Capacity utilization rate and release of new production capacity: Domestic lithium carbonate companies build new production capacity and put into operation, and capacity utilization rates (such as maintenance, impact of power restrictions, production limits, etc.) have an impact on the price of lithium carbonate. When production capacity is released centrally, supply in the lithium carbonate market increases dramatically, enough to meet downstream demand, and the price of lithium carbonate tends to fall.

Lithium carbonate import volume: At this stage, China still needs to rely on imports to meet part of the demand for lithium carbonate, so changes in lithium carbonate imports will affect the supply of lithium carbonate. The import volume of lithium carbonate is mainly affected by factors such as customs clearance of the epidemic and overseas holidays.

Inventory situation: Upstream and downstream enterprises regulate the circulation volume of lithium carbonate in the spot market by adjusting the inventory situation, thereby affecting the price of lithium carbonate.

2. Demand: Both policy-driven and market-driven

Policy driven: In order to promote energy saving and emission reduction and promote a green economy, the country continues to promulgate new policies to support the electrification transformation of the automobile industry and stimulate the development of the NEV market. In the past, support policies were represented by subsidy policies. In recent years, the main policies include the “double credit” policy and the “green card” policy.

Market-driven: At present, China's NEV industry has entered a new market-driven stage. The contribution of subsidies to the consumption of new energy vehicles is gradually declining, and the proportion of individual car purchases motivated by the market has risen to close to 75%. This transformation is mainly due to two major factors: the improvement of new energy battery technology and the reduction in the cost of new energy vehicles.

3. Cost: The cost of lithium carbonate mainly includes mining costs and processing costs

Among them, mining costs are related to the type and grade of upstream lithium resources and the mining technology used. Generally speaking, the cost of lithium extraction is ranked from highest to lowest: spodumene, lepidolite, domestic salt lakes, and South American salt lakes. Compared at home and abroad, the quality of foreign lithium resources, such as South America's salt lake resources and Australia's spodumene resources, is generally superior to domestic, so the mining cost of lithium resources in China is relatively high.

[Overview of lithium carbonate spot market]

According to data released by Fubao Lithium Power Network, today the Fubao lithium carbonate index was 10,3666 yuan/ton, down 4,000 yuan/ton; battery-grade lithium carbonate was 109,000 yuan/ton, down 4,000 yuan/ton; industrial grade lithium carbonate (consolidated) was 97,000 yuan/ton, down 4,000 yuan/ton. The lithium hydroxide index was reported at 117,000 yuan/ton, down 1,000 yuan/ton. Spodumene (African SC 5%) reported 840 US dollars/ton, flat; spodumene (China CIF 6%) reported 1,725 US dollars/ton, down 50 US dollars/ton; spodumene index (5% ≤ Li2O <6%) reported 9725 yuan/ton, remained flat; lithium mica index (2% ≤ Li2O <4%) reported 3,450 yuan/ton, down 300 yuan/ton; phosphatidite (7% ≤ Li2O <8%) reported 12,000 yuan/ton, down 400 yuan/ton; The lyte index (1.5% ≤ Li2O < 5%) reported to 3460 Yuan/ton, down 200 yuan/ton; the main base difference was 0, the same as last Friday.

[Lithium Carbonate Futures Market Overview]

As of the closing of trading at 15 o'clock on December 4, Guangzhoushi's lithium carbonate futures contracts had fallen to a standstill across the board. Among them, the main contract, LC2401, fell 6.95% to 96350 yuan/ton. Today, its holdings increased by 9951 lots to 145,300 lots.

[List of institutional holdings]

According to the position data of the top 20 futures companies, the main lithium carbonate futures contract held a net position of -14,304 lots today, in a net short position, down from -17,832 lots on the previous trading day. The top 20 bulls increased their holdings by 9281 lots, while the top 20 bears increased their holdings by 11,475 lots. It is worth noting that the top five short positions increased by a total of 18,873 lots, of which the long positions increased by 7,908 lots, and the bears increased their positions by 10,965 lots.

[In-depth interpretation of lithium carbonate futures in institutional research reports]

Galaxy Futures: The market atmosphere is still pessimistic, and there is still room for price to decline (bearish)

The cooling of the overseas electric vehicle market will affect overall export demand next year, and the US IRA restrictions will not affect the trend. Environmental issues at Qinghai Salt Lake may ferment, and the market has lingering feelings about the increase in soda ash, but there are currently no relevant production reduction announcements, so we are concerned about subsequent progress. Short-term weekly inventory tracking revealed that the smelter was clearly out of stock this week. Downstream and other inventories increased slightly, and total inventory decreased. Currently, the industrial chain is actively removing stocks. The market atmosphere is still pessimistic. Spot prices are expected to be sold, and there is still room for prices to decline, so it is recommended to hold empty orders. However, the lower it is, the stronger the resistance may be. Be careful to prevent the risk of a rebound and not chase short runs.

Jinrui Futures: Cost focus continues to decline, and lithium carbonate is expected to continue to operate weakly and volatile (bearish)

There has been no improvement in fundamentals, bearish sentiment is spreading, and spot transactions are light. At present, the supply is still sufficient, while downstream demand is clearly under pressure. The market's expectations for excess next year are quite consistent. Judging from the logic of cost support, at present, mineral prices continue to fall, and the focus of costs continues to shift, squeezing mine-side profits to benefit smelting production. Looking ahead to the future market, the cost focus continues to decline, demand has not improved, and excess supply and demand continues, with 80,000 to 90,000 as the cost support level. It is expected that lithium carbonate will continue to operate weakly and fluctuate.

SDIC Anxin Futures: A large number of volatile investors and institutions based on fundamental judgments mainly focus on shorting, and the cautious and bearish approach continues (bearish)

At the beginning of last week, due to news released by Guangshi to increase delivery warehouses and factories, the market interprets that the probability of the January contract crowding has declined, which is a factor in the intensification of short-term market conditions. At the same time, smelter inventories have been continuously accumulated for several weeks. The main reason is that since the 11th Australian mine was rapidly lowered and the M+1 model, the mine-end inversion situation has been fundamentally mitigated, smelters have once again experienced processing profits, and increased foreign mining imports and lithium carbonate production. Inventory pressure in the midstream has once again risen, and market rumors about salt mills selling goods have increased. Another important factor in the continued decline in futures prices is on the capital side. Since the launch of lithium carbonate futures, market popularity has remained high. Accumulated capital has reached 6.5 billion dollars. A large number of investors and institutions are mainly shorting based on fundamental judgments. Continued shorting of additional capital has also exacerbated the decline in lithium carbonate futures. Technically, the trend of lithium carbonate is extreme, and the cautious bias continues.

Shenyin Wanguo Futures: The basis difference is large, be wary of the return of futures before delivery months (neutral)

The lithium carbonate 01 contract continues to fall sharply. Currently, lithium prices have led to increased cost pressure on some lithium salt plants. Some manufacturers that collect lithium mica are already losing money, and lithium salt factories are raising prices, driving the lithium carbonate spot market to rise. The increase in lithium carbonate market supply for November has been determined, while downstream demand performance is slightly lackluster. It is expected that domestic lithium carbonate supply may not increase significantly after November. It is important to note that in a situation where empty positions in the lithium carbonate 01 contract are still high, uncertainty about the grade of battery-grade lithium carbonate in mainstream deliverables may also affect the industry's judgment on future prices. The basis difference is large, and I am wary of the return of futures before the delivery month.

Guoxin Futures: Excess fundamentals have not changed the guiding force of falling prices, and there is still room for major contracts to fall (bearish)

Looking at the spot market, the upstream and midstream sell-off sentiment continues, and there is frequent news of low prices on scattered orders, but the decline in the price of zero orders has not boosted downstream receiving sentiment. Under the downward trend in prices compounded by high inventories, the willingness to pick up goods on the demand side is still sluggish, and transactions are mostly dominated by long-term cooperation. From a fundamental point of view, the volume of lithium ore arriving in Hong Kong from salt lakes in South America and Australia and Africa is expected to increase in November. Combined with current downstream production corresponding to the traditional low season in the first quarter, the production schedule for 12 is expected to drop slightly. Looking ahead to the future market, excessive fundamentals have not changed their guiding force for falling prices, and there is still room for major contracts to fall.

[Risk factors to be concerned about in the future]

1. The situation of stock replenishment before the holiday season;

2. The situation from the mine end to the port;

3. The status of the enterprise's commencement;

4. Stable supply of raw materials;

5. Production and sales of new energy vehicles;

6. The status of lithium mining projects being put into operation, etc.

The translation is provided by third-party software.

The above content is for informational or educational purposes only and does not constitute any investment advice related to Futu. Although we strive to ensure the truthfulness, accuracy, and originality of all such content, we cannot guarantee it.
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