CITIC Securities released research reports stating that the lithium price rebounded in Q2 2024, promoting the recovery of overseas lithium mineral supply; lithium extraction companies in South America saw a year-on-year increase in production in Q2 2024, leading to improved performance.
According to the Futu Finance app, CITIC Securities released research reports stating that the lithium price rebounded in Q2 2024, promoting the recovery of overseas lithium mineral supply; lithium extraction companies in South America saw a year-on-year increase in production in Q2 2024, leading to improved performance. In September, the domestic price of lithium carbonate futures fell below 0.07 million yuan/ton, resulting in accelerated clearance of global lithium resources. The bank has lowered its forecast for supply growth in 2024. As domestic lithium salt production declined in August, combined with an increase in cathode material production, it is expected that the turning point for lithium salt inventory is approaching, with limited downward space for lithium prices. CITIC Securities predicts that as lithium prices reach a low point, market expectations for the bottoming out of the lithium industry will strengthen, and attention to lithium industry stocks is expected to increase.
The main points of the Citic Securities research report are as follows:
Overseas lithium mineral production increased in Q2 2024.
In Q2 2024, the total production of lithium concentrates by major overseas lithium mining companies was approximately 1.04 million tons, a quarterly increase of 13.2% and a year-on-year increase of 17.7%. Among them, Greenbushes, Wodgina, Pilbara, Bald Hill, and NAL saw quarterly production growth of 19%, 29%, 26%, 17%, and 23%, respectively; while Mt Marion, Mt Cattlin, Finniss, and Sigma experienced quarterly production declines of 2%, 22%, 17%, and 10%. The bottoming out of lithium prices in the second quarter stimulated the smooth release of low-cost lithium mines, but some high-cost mines ceased production or significantly reduced production, resulting in an obvious differentiation in lithium mining operation strategies.
The selling price of overseas lithium concentrates reached a bottom and rebounded in Q2 2024, with July seeing an increase in lithium mineral quantity and a decrease in price.
In Q2 2024, the month-on-month changes in the selling prices of Greenbushes, Mt Marion, Mt Cattlin, Pilbara, Wodgina, Finniss, Bald Hill, NAL, and Sigma lithium concentrates were -1%, +11%, +23%, +4%, +15%, +66%, +16%, -8%, and +11%, respectively. The price of lithium in the Chinese market increased month-on-month, leading to a bottoming out and rebound in the selling price of lithium concentrates. In July, the quantity of imported lithium concentrates in China increased by 18% compared to the previous month and 8% compared to the same period last year, while the selling price decreased by 5% compared to the previous month. As domestic lithium prices once again fell to a low point, the selling price of concentrates declined month-on-month. However, it can be seen that low-cost lithium mines have not reduced production.
The lithium salt production in South America maintained growth in 24Q2, but declined in 24Q3.
In 24Q2, the lithium extraction businesses of Albemarle, SQM, and Arcadium in South America saw year-on-year revenue decline of -53%/-55%/+8%, and sequential increase of +4%/+20%/-2%. Due to the rebound in lithium prices in the second quarter, some companies' lithium businesses turned positive on a sequential basis. In the second quarter, the lithium salt production in South America maintained growth on a year-on-year and sequential basis, mainly due to the rising lithium salt prices in the Chinese market and the successful expansion of salt lake manufacturers. The export volume of Chilean lithium carbonate in July-August decreased by 4% sequentially. Chilean salt lake companies have flexible operating strategies and their production follows lithium price fluctuations. The decline in lithium prices in the third quarter led to a decrease in Chilean lithium salt exports.
The forecast for supply growth has been revised downward, but the oversupply situation is difficult to alleviate.
Since 2024, the continuous decline in lithium prices has led to supply growth falling short of expectations, mainly due to reductions in lithium extraction projects in South America and high-cost lithium mining projects, such as Core Lithium's Finniss project officially shutting down and Arcadium Lithium planning to shut down the Mt Cattlin lithium mine in Australia and significantly slow down expansion plans in South American salt lake areas. The bank has revised its annual lithium supply forecast from 1.289 million tons to 1.187 million tons, and the surplus forecast from 0.147 million tons to 0.073 million tons, significantly narrowing the surplus ratio. Despite the downward revision in supply growth forecast, it is expected that the inertia of supply release will make it difficult to alleviate the oversupply situation in the global lithium market in 2025-2026, and lithium prices will continue to operate at the bottom.
The decline in lithium salt production in August combined with the growth in cathode material production limits the downward space for lithium prices in the future.
In August, domestic lithium salt production decreased by 5.6% on a sequential basis, while cathode material production increased by 7.8% on a sequential basis. By the end of August, domestic lithium carbonate inventory increased by 5.6% on a sequential basis, with a slower growth rate compared to the end of the previous month. As domestic lithium battery and cathode material production enters the peak season, lithium salt production continues to decline, and it is expected that lithium salt inventory will soon reach a turning point. In September, Contemporary Amperex Technology announced the suspension of its lithium mine and smelter in Yichun due to lithium prices falling below its production costs. The continuous decline in lithium prices has accelerated the clearance of global lithium resources, and it is expected that the excess supply will be significantly reduced, limiting the downward space for lithium prices in the future.
Investment strategy:
The risks of a significant decline in lithium prices; slower-than-expected downstream demand growth; supply of overseas lithium resource projects exceeding expectations; and policy and operational risks in overseas lithium resource development by companies.