① Lithium carbonate, which has experienced a sharp rise and fall, is still the focus of the lithium battery industry chain. According to industry insiders, supply is expected to exceed demand in 2024. Based on a lithium carbonate price of 100,000 yuan per ton, the annual surplus is expected to exceed 200,000 tons. ② Excess production capacity. According to industry analysis, 80,000 yuan/ton is a cost line that balances supply and demand. Although there is an increase in supply, major mining companies have abundant cash flow, and it may be difficult for lithium prices to bottom out with cost support.
Financial Services Association, April 3 (Reporter Zeng Chuchu) The “2024 Jiangxi Lithium Industry Conference and the 2nd Lithium Carbonate Supply and Demand Strategy Meeting” hosted by Shanghai Steel Union E-Commerce Co., Ltd. and Minmetals Futures Co., Ltd. was recently held in Yichun, Jiangxi.
Lithium carbonate, which has experienced a sharp rise and fall, is still the focus of the lithium battery industry chain. According to industry insiders, after experiencing large price fluctuations in 2023, the lithium market is expected to show an oversupply situation in 2024. Based on the price of lithium carbonate of 100,000 yuan per ton, the annual surplus is expected to exceed 200,000 tons.
Is overcapacity a game or a clear game for the industry? According to industry analysis, 80,000 yuan/ton is the balance cost line between supply and demand. Although South American salt lake, African, and domestic hard rock projects will increase supply, major mining companies have abundant cash flow, making it difficult for lithium prices to bottom out due to cost support.
2024 lithium resource supply growth determined
Judging from the global supply of lithium resources, lithium resources have increased significantly this year. Zeng Yuke, a lithium carbonate researcher at Minmetals Futures, said that in 2023, several lithium resource projects were successfully put into operation and climbed, and the global supply of lithium resources reached 1.05 million tons. It is expected that there will be a stable release of mine-side resources in 2024, and supply will accelerate. (based on the estimate of 100,000 yuan per ton of lithium carbonate), the global supply of lithium resources reached 1.55 million tons LCE, an increase of about 47% over 2023.
Looking at the supply side, Zeng Yuke said that South America, Australia, and China currently contribute about 95% of lithium carbonate production. Furthermore, new projects in Africa are being explored and continuously exported, and this year's share will gradually increase. However, at present, it is still mainly based on Australian mines, South American, and domestic resources.
In terms of the increase in lithium resources in Africa, domestic listed companies previously scrambled to lay out the layout, and there will be more supply this year. According to Minmetals Futures estimates, Zimbabwe is expected to contribute a supply increase of 108,000 tons of LCE in 2024.
Among them, according to public disclosure by various companies, China Mining Resources (002738.SZ) Bikita lithium mine's 2 million tons/year lithium permeable feldspar production line and 2 million tons/year spodumene production line have met production standards. Currently, lithium concentrate is continuously being shipped back to the country to meet the raw material needs of domestic smelters. Huayou Cobalt (603799.SH) recently announced that all production lines of the Prospect Lithium Mine Arcadia lithium development project have completed equipment installation and commissioning, and have been put into trial production, successfully producing the first batch of products. SabiStar and Yahua Group (002497.SZ) of Shengxin Lithium Energy (002240.SZ) have climbed production to varying degrees in Africa by holding the Kamativi lithium mine in Zimbabwe.
Another lithium trade source told the Financial Federation reporter that Australian mines are “too expensive,” and that African lithium ore has a relatively high taste and is relatively affordable. There are great opportunities for lithium mining in Africa this year. After returning to the country through trade, they will sell or process lithium carbonate themselves for hedging or sales, depending on the circumstances, and there will be a certain profit margin.
Furthermore, Zeng Yuke said that with the completion and commissioning of the Ganfeng Lithium (002460.SZ) Cauchari-Olaroz salt lake project and the Zijin Mining (601899.SH) 3Q salt lake project, Argentina is expected to increase LCE by 45,000 tons year-on-year in 2024. Domestically, the Lijiagou and Dahongliutan projects are expected to be officially put into operation in the first half of '24, and Qinghai and Tibet's salt lakes are also climbing to varying degrees.
On the demand side, Zeng Yuke said that under optimistic expectations, global sales of new energy vehicles increased by 25%-30% throughout the year to more than 17.5 million units, with domestic sales exceeding 12 million units. Furthermore, lithium battery shipments are expected to increase by nearly 30% in 2024, driven by new energy vehicles and new energy storage. The total demand for lithium carbonate is expected to be 705,900 tons in 2024.
Cui Dongshu, Secretary General of the Passenger Transport Federation, said, “In the past few years, the penetration rate of new energy in China has grown rapidly. It is only 27% in 2022 and 36% in 2023. We believe that this year, China's NEVs will also break through 40% penetration rate and achieve good performance in the autonomous new energy market.”
The supply and demand balance cost line is anchored at 80,000 yuan/ton in the industry
Demand continues to grow. According to confirmed expectations of oversupply, the cost line of balance between supply and demand means that the industry is a key game point between clearing the industry and reversing supply and demand. The industry's attention to cost has skyrocketed. Combined with analysis by many industry insiders, 80,000 yuan/ton may have become an industry consensus.
According to reports, the production cost of lithium salt varies greatly depending on the differences in raw materials. Salt Lake concentrates the cost of a single ton of lithium carbonate at 30,000 to 50,000 yuan/ton, which still has a large cost advantage. The cost of a single ton of lithium carbonate for spodumene is 40,000 to 80,000 yuan/ton. The cost of producing a single ton of lithium carbonate from high-quality lithium mica is 60,000 yuan/ton, and the overall grade of newly built lithium mica is low, even if a single ton of lithium carbonate was used in the early stages, the cost of a single ton of lithium carbonate was close to 100,000 yuan/ton. Furthermore, the Financial Services Association reporter learned that the cost of lepidomite purchased from outside is over 100,000 yuan/ton.
Judging from cost and supply estimates, Zeng Yuke believes that in 2024, the 90% tax-free cost quantile for the mine is around 73,000 yuan/ton, and the price range of 80,000 yuan/ton has strong cost support.
Fang Li Zhe, a senior researcher at the New Energy Division, said, “80,000 is definitely a very important cost support line.” According to its research, it is estimated that China's salt lake will produce about 157,000 tons per year, overseas salt lakes are expected to enter the Chinese market to reach 228,000 tons, and the expected production of lithium spodumene at a reasonable price is about 257,000 tons and 143,000 tons of lithium mica. The cost of 80,000 yuan/ton and the offline supply volume is about 626,000 tons.
If the 80,000 yuan/ton cost line is used to clear the boundary, whether lithium prices will fall more than once will become the next hot topic of concern.
Fang Li Zhe said that production capacity is expanding too fast, but when prices are bad, the industry's understanding of overall future expectations or prices is rational. Production capacity production will slow down, and although demand in China's lithium battery industry chain slows down, it still maintains a growth rate of more than 20%. Under these circumstances, the balance between supply and demand will once again intersect. According to its forecast, there will probably be another crossover in 2026. Based on the analysis and components of price changes in 2023, Fang Lizhe believes that once the industrial chain game is settled, the center of price fluctuations remains at 85,000/ton; the industrial chain is heated in groups, and the price fluctuation center remains at 95,000/ton.
Based on the above analysis, resource-side oversupply is expected to be difficult to reverse in the short term, but with regard to the medium- to long-term future, Zhang Sikai, chief energy metals analyst at Minmetals Securities, believes that in the long run, rising costs are the general trend in combination with the continued decline in resource endowments in production mines.
As to whether the price of lithium will fall more than the price of lithium, Zhang Sikai said that in the previous cycle, when lithium carbonate fell below the cost price of the Australian mine, many companies still maintained high utilization production rates in order to stabilize cash flow or repay debts, and lithium prices fell over. However, since 2023, Australian mining companies have had plenty of cash flow, which also means that when prices fall close to the cost line, they will resolutely stop production. Recently, leading Australian companies have begun to cut production one after another. From this point of view, mining side support for lithium prices will still be quite strong.