The Zhitong Finance App learned that Guotai Junan released a research report saying that based on the 2024 supply and demand pattern, lithium prices will continue to fluctuate in 2024 and slowly bottom out in 2024. The bank believes that around the end of the first quarter of 2024, due to the decline in prices throughout 2023 and the removal of industry stocks, it may occur because of a short-term structural mismatch between supply and demand, leading to a rebound in lithium prices. Looking back at the longer-term dimension, the bank believes that battery-grade lithium carbonate will continue to fall to 8-100,000 yuan/ton. Due to the impact of supply removal capacity and price declines that exceed expectations, the supply release of some projects put into production in the second half of 2024 may be delayed.

Recommendations: Yongxing Materials (002756.SZ), Zangge Mining (000408.SZ), Tianqi Lithium (002466.SZ), Ganfeng Lithium (002460.SZ), Shengxin Lithium (002240.SZ), Rongjie Co., Ltd. (002192.SZ). Benefit: China Mining Resources (002738.SZ).

Guotai Junan's views are as follows:

In 2024, the oversupply industry pattern intensified, and the increase in supply mainly came from overseas.

The new supply in 2024 mainly comes from overseas. Among them, the overseas supply of lithium ore mainly comes from Africa, and the overseas supply of lithium extraction from salt lakes mainly comes from Argentina and Chile. The supply of lithium ore in China mainly comes from salt lakes in Tibet, but the supply for 2024 is limited, and it is expected that it will become the main force of lithium supply in China in 2025 and beyond. Demand growth in the global lithium industry mainly comes from new energy vehicles and energy storage. Although the growth rate of the NEV industry has slowed compared to before, the base is large, so it is still the main area of demand growth. Although the current share of demand for energy storage is limited, the growth rate will be the highest in future industry demand.

In the downward price cycle, the cost of lithium mining for new companies will face a testing period.

The sharp rise in lithium prices in 2021-2022 has attracted many new companies to invest in the lithium industry. The power industry chain will be de-inventoried in the first half of 2023, and the energy storage industry chain will be de-inventoried from August 2023. The bank believes that when the entire lithium battery industry chain is inventoried throughout the year, the corresponding increase in terminal demand cannot be directly proportional to the increase in lithium carbonate procurement demand, which is the core reason for the decline in lithium prices in 2023. The annual lithium price has declined from its highest point, but the average price is still in a high position compared to the lithium price in the previous cycle — according to SMM, the average price of battery-grade lithium carbonate for the full year of 2023 was 266,400 yuan/ton, while the highest lithium price in the previous cycle was 567,500 yuan/ton. 2024 will be a testing year for the lithium industry, especially for new companies. Whether their product costs can be successfully reduced and where they ultimately fall on the cost curve will be the key to whether they can occupy a place in the industry in this cycle.

Based on the 2024 supply and demand pattern, the bank believes that lithium prices will still be in a volatile downward trend and slowly bottoming out in 2024.

Around the end of the first quarter of 2024, due to the decline in prices throughout 2023 and the removal of industry stocks, the bank believes it may occur because of a short-term structural mismatch between supply and demand, leading to a rebound in lithium prices. Looking back at the longer-term dimension, the bank believes that battery-grade lithium carbonate will continue to fall to 8-100,000 yuan/ton. Due to the impact of supply capacity removal and price declines faster than expected, the supply release of some projects to be put into operation in the second half of 2024 may be delayed. As the penetration rate increases, the bank believes that it is possible that the next round of upward cyclical growth will occur ahead of schedule within 2025, rather than 2026, which is relatively balanced, calculated entirely on the balance sheet. According to the empirical rules of the previous cycle, the bank deduces that the sector is expected to solidify and rebound before lithium spot prices.

Risk warning: The sales volume of new energy vehicles fell short of expectations. Battery iteration risk.