According to the Zhifinance APP, Huafu Securities released a research report stating that the significant improvement in supply and demand in August led to the industry starting destocking at the end of the month, with supply disruptions in September and strong production support causing price fluctuations on the stronger side. The bank indicated that the surplus situation in 2024 has not changed, and it is difficult for lithium prices to rebound significantly in 2025 and beyond due to stronger expectations of oversupply, still needing to achieve supply-demand rebalancing through lithium price overshooting. The current sector as a whole is positioned more to the left at the bottom of the cycle, not optimistic about lithium prices but not pessimistic about stocks, focusing on opportunities on the left side.

Huafu Securities' main points are as follows:

Investment Highlights:

Lithium Ore: In August, major imports of 0.048 million tons of LCE, down -6% month-on-month, up +120% year-on-year, including 0.031 million tons of LCE from Australia, down -22% month-on-month, up +77% year-on-year. From January to August, cumulative imports of 0.356 million tons of LCE equivalent lithium ore, an increase of +0.093 million tons of LCE/+36% year-on-year. In August, lithium ore shipments from Australia's Port Hedland to China increased by 36% month-on-month.

Lithium Carbonate: Consumption in August was 0.079 million tons, down -11% month-on-month, up +43% year-on-year. Domestic consumption was 0.061 million tons, down -6% month-on-month, up +36% year-on-year; imports were 0.018 million tons, down -27% month-on-month, up +63% year-on-year, with 0.013 million tons imported from Chile, down -33% month-on-month. From January to August, total supply was 0.571 million tons, an increase of +0.2 million tons/+54% year-on-year. Domestic supply was 0.425 million tons, an increase of +0.144 million tons/+51% year-on-year; imports were 0.148 million tons, an increase of +0.051 million tons/+53% year-on-year. In August, to maintain market share and ensure overall stability, self-owned and toll lithium salt factories operated steadily, while non-integrated lithium salt factories and recycling plants reduced output due to oversupply; imports from Chile decreased significantly. Positive electrode production in September reached its peak for the year, with strong bullish sentiment in the upstream under supply disruptions, SMM expects a 1%-3% increase in domestic lithium carbonate compared to the previous month.

Lithium Hydroxide: Consumption in August was 0.013 million tons, down -15% month-on-month, down -1% year-on-year. Domestic consumption was 0.023 million tons, down -4% month-on-month, down -5% year-on-year; exports were 0.01 million tons, up +15% month-on-month, down -7% year-on-year. From January to August, total consumption was 9.3 tons, a decrease of -0.014 million tons/-13% year-on-year. Domestic consumption was 0.176 million tons, a decrease of -0.009 million tons/-5% year-on-year; exports were 0.088 million tons, an increase of +0.007 million tons/+8% year-on-year.

Anode and hexafluoride: August production volume of 0.305 million tons (lithium iron phosphate 21.5+ternary 5.8+cobalt lithium 0.94+manganese lithium 0.92+hexafluoride 1.1), +7.8% month-on-month, +31% year-on-year. Among them, lithium iron phosphate 0.215 million tons, +8.5% month-on-month, +43% year-on-year. January to August accumulated production of 2.058 million tons, +0.65 million tons year-on-year, +46%. Among them, lithium iron phosphate 1.43 million tons, +0.56 million tons year-on-year, +65%. September is the peak period for anode production, and October will gradually weaken.

Lithium supply and demand: August lithium surplus of 0.004 million tons, surplus reduced significantly, with supply of 0.09 million tons, -11.8% month-on-month; demand of 0.086 million tons, +6.4% month-on-month. January to August accumulated surplus of 0.061 million tons, with supply of 0.653 million tons, +0.188 million tons year-on-year, +41%; demand of 0.591 million tons, +0.157 million tons year-on-year, +36%.

Lithium price: In early August, due to the industry's strong expectations for the peak season inventory replenishment, although lithium prices had fallen more before, the upstream production reduction was less than expected. By the end of the month, due to good production scheduling and macro sentiment recovery, the lithium carbonate prices gradually started to rebound. September is the peak period for anode production, with disruptions in upstream supply, lithium prices will fluctuate on the stronger side but with limited rebound. As production weakens gradually in October, lithium prices will fluctuate weaker.

Investment advice: The oversupply situation will continue into 2024, with stronger expectations for oversupply in 2025 and beyond making it difficult for lithium prices to rebound significantly. Rebalancing of supply and demand still requires lithium prices to rebound from oversold levels. The sector is currently at a relatively low point in the cycle, with lithium prices not optimistic but stocks not pessimistic, focusing on opportunities on the left side. Individual stocks: Blue-chip recommendations include Qinghai Salt Lake Industry (000792.SZ), Zangge Mining (000408.SZ), Sinomine Resource Group (002738.SZ), Yongxing Special Materials Technology (002756.SZ), and elastic recommendations Tianqi Lithium Corporation (002466.SZ), Ganfeng Lithium (002460.SZ), among others.

Risk warning: Electric vehicle demand continues to be lower than expected, and progress in resource-side projects exceeds expectations.