"Science and Technology Innovation Board Daily" reported on July 1st (Reporter: Yu Jiaxin, Qiu Siyu, Intern Reporter: Ren Siying) Under the pressure of oversupply, which led to the sharp drop in prices, the lithium carbonate industry is facing another major news.

According to Bloomberg News, Four new lithium mine projects in Argentina will be put into production in the next few weeks to months, resulting in a substantial increase in Argentina's annual lithium production capacity by 79%, up to 202,000 metric tons of equivalent.

Several Chinese companies participated in the development of the above-mentioned new lithium mine projects. It is reported that these four projects are Centenario Ratones, participated by China's Qingshan Holdings and French mining company Eramet SA, Tres Quebradas of Zijin Mining Group, Mariana of Ganfeng Lithium, and Sal de Oro of South Korea's POSCO Holding Corporation.

"This is planned expansion, and the relevant supply has been basically calculated, and there will be no additional supply," Moke, founder of Zhenli Research, told the "Science and Technology Innovation Board Daily" journalist. Taking the Mariana of Ganfeng Lithium as an example, public information shows that the lithium mine project started in June 2022 and plans to produce the first batch of products before the end of 2024.

"On the contrary, due to the decline in lithium price, some high-cost projects are reducing or suspending production, and this year's total supply may not be as expected at the beginning of the year," Moke further stated.

▍ Uncertainty in production has limited impact on lithium prices

Several industry insiders told the "Science and Technology Innovation Board Daily" journalists that it will take some time for Argentine lithium mines to reach production capacity, and there are many uncertainties during this period, so the impact on lithium prices is limited.

Among them, Sinomine Resource Group staff stated that "the current market annual production capacity is about 1.2 million to 1.3 million tons. If these four projects can be put into production in the second half of this year, it may have some impact on lithium prices. However, these four projects will be put into production one after another, so we still need to see changes in future supply and demand relationship."

According to some executives of lithium mining companies interviewed by the "Science and Technology Innovation Board Daily" journalists, "Based on the current publicly available information, the production capacity of 200,000 tons represents an increase of 79% compared with the previous 110,000-ton capacity. Even without considering whether the production capacity is exaggerated, there is still a climbing period before production capacity can be achieved, and these projects will be put into production in the second half of this year or at the end of this year. There is even a possibility that production capacity may not be achieved. For example, the Argentine project is said to be able to produce 200,000 tons by the end of the year, but the actual situation may be that it can produce 200,000 tons only by the end of next year."

Meanwhile, the executive further said that the cost of Argentine salt lake project is relatively low, so everyone will still see the continued expansion of Argentine projects. However, salt lake projects usually have greater uncertainty, and there is often a risk of delay.

Youngy Co., Ltd. officials believe that "currently, the industry has sufficient production capacity, and the impact on prices needs to be judged from a macroscopic level. The factors that currently affect lithium prices also include emotional issues caused by supply and demand index. This news may have an impact on prices in the short term."

Moke, founder of Zhenli Research, also mentioned to the "Science and Technology Innovation Board Daily" journalist, "This news will have a short-term impact on lithium prices in terms of emotions, but unless there are unexpected incidents, it will be repaired immediately. Overall, the impact on lithium prices and the industry is not significant."

According to Shanghai Steel Union's data on June 28, the average price of battery-grade lithium carbonate was RMB 90,000/ton. Due to overcapacity and the sharp drop in lithium prices, lithium mine companies are reducing production in high-cost projects. As mentioned by executives of the above-mentioned lithium mining companies, the reason why the projects located in Argentina can be put into production is also due to its low cost.

“The cost of the Argentine salt lake project is relatively low, so the Argentine project will continue to expand. This is the regional advantage of resources." The lithium mine executives mentioned that after the lithium price dropped rapidly from a high level, the pressure on high-cost production capacity was relatively large, so there were more high-cost production capacity reducing or stopping production. At present, expansion depends on projects that are relatively cost-competitive.

"Huayuan Securities analyst Tian Yuan predicts that the lithium price has recently fallen beyond reasonable levels, and the phase of stimulus of temporary rebound has come due to the news of maintenance on lithium salt plants. It is expected that the subsequent prices will be weak and fluctuate."

Based on the supply and demand side, Lan Xue, an analyst at East Asia Futures, said that domestic lithium carbonate production is still at a high level. From the supply side, although some companies have reported maintenance news, domestic production remained rising this week from June 24th to June 28th, with a weekly output exceeding 15,000 tons.

"Overall, since the supply and capacity are still being delivered in an orderly manner and the import volume remains high, there will still be overcapacity in the short term, which expands the surplus capacity." Xue believes.

In terms of the impact on the company, Youngy Co., Ltd. officials stated that the company will not adjust its production capacity due to the news from Argentina, but adjust it based on the overall market situation. "Projects that the company is producing at present cannot guarantee profitability because of large price fluctuations."

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Sinomine Resource Group personnel also stated that the news from Argentina will not have an impact on the company's production capacity, but may have an impact on prices. However, the production capacity of the Argentina project will not be fully realized in the short term, so the company will still follow its normal production and sales plan.