Source: Wall Street See
Author: Li Xiaoyin.
UBS estimates that the suspension of Contemporary Amperex Technology's lithium business in Jiangxi will lead to an 8% decrease in China's monthly production of lithium carbonate. The lithium price is expected to rise by 11%-23% within the year and will be supported at $8600/ton.
On the morning of September 11th, Wednesday, UBS Group and others released a research report titled "The Bottom of China's Lithium Price". According to internal sources, Contemporary Amperex Technology has decided to suspend its lithium mica business in Jiangxi on September 10th.
After the news came out, the main contract 2411 of lithium carbonate futures on the China Zhengzhou Commodity Exchange rose more than 7% in intraday trading, and it has risen nearly 7% to 77,700 yuan/ton as of now.
Hong Kong stocks plummeted today, with a low of HKD 16.34 at press time, down more than 8%, the largest single-day decline since October 2022, and the stock price hit a new low in nearly 2 months. $TIANQI LITHIUM (09696.HK)$It also experienced a significant increase, and it has currently risen more than 13% to 21.1 Hong Kong dollars.
The lithium battery sector's stock prices in the after-hours trading of US stocks rose simultaneously, among which $Sociedad Quimica Y Minera De Chile (SQM.US)$ rose more than 5%, $Albemarle (ALB.US)$ Up more than 3%.
Previous analysis in the report pointed out that the cash cost of Contemporary Amperex Technology's lithium business is approximately $10,968 per ton (excluding taxes) or 89,000 yuan (including taxes). According to data from the Shanghai Metal Market (SMM), the spot price of lithium carbonate has been below the cost line of Contemporary Amperex Technology since mid-July 2024.
This means that Contemporary Amperex Technology's lithium business has been operating at a loss for two consecutive months. The report states:
Previously, we thought that Contemporary Amperex Technology (CATL) might not be so sensitive to the loss in the lithium business because they are more concerned about the profits of the overall battery business. However, after two consecutive months of losses in the lithium business, coupled with the background of lithium prices continuing to decline under pressure, we finally see that those higher-cost producers have started to reduce supply normally.
UBS Group stated that the suspension of CATL's lithium business in Jiangxi will reduce China's monthly production of lithium carbonate by 8%, equivalent to a reduction of 5,000-6,000 tons of lithium carbonate equivalent (LCE) per month. In the context of the market supply and demand tending to balance, this will be a long-term bullish factor for lithium prices.
The report predicts that the lithium price is expected to have an upward space of 11%-23% within the year, and the lithium price will be supported at $8,600/ton (equivalent to RMB 61,183/ton).
According to UBS's analysis of the global cash cost curve for 2024, in the long term, it is expected that the lithium price will be supported at $9,909/ton (equivalent to RMB 70,496/ton) and peak at $10,968/ton (equivalent to RMB 78,030/ton), because CATL may resume its lithium business when the lithium price rises to that level.
Editor/Jeffy