Source of this article: Times Finance Author: Lin Qian
The new energy industry chain with mismatched supply and demand is ushering in new challenges.
According to media reports, Chile's Constituent Assembly recently adopted a preliminary proposal submitted and adopted by the Parliamentary Committee on the Environment to promote the nationalization of copper, lithium and other strategic assets. This suggests that mineral resources, including Chile's lithium mines, will take a crucial step in the nationalization process.
On February 11, Zhang Rui, a researcher at the Economic and Technological Research Institute of the Global Energy Internet Development Cooperation Organization, said to Times Finance that in the context of the current lithium resources as a strategic resource for new energy vehicles, the above measures of the Chilean authorities may intend to obtain more benefits under this big wave, enhance the domestic social welfare supply, and take the opportunity of nationalization to enhance their voice in the global industrial chain.
It is worth mentioning that in mid-January, BYD won the bid for the Chilean lithium mining project and obtained a quota of 80,000 tons of lithium production, but it has been suspended by the Chilean court. For the latest progress of the project, Times Finance sent an interview to BYD, but there was no response as of press time.
In addition to BYD's relevant layout in Chile, Tianqi Lithium owns 23.77% of the equity of the world's largest lithium carbonate producer - Chilean Chemical Company (SQM), and if the above proposal of the Chilean government is put into shape, it may have a direct impact on Tianqi Lithium. In this regard, Times Finance called Tianqi Lithium on February 10, but the other party said that it was inconvenient to accept media interviews. Times Finance learned from its securities department as an investor that this is only a preliminary proposal, and there is still a long process before it is finally passed and effective, and there are variables in the middle.
It is understood that the debate on the proposal will officially begin later this month. Before it is formally adopted, the proposal must also pass two links: a vote by all members of parliament and a referendum.
Previously, the relevant person in charge of Tianqi Lithium Said in an interview with the media that the nationalization of (Chile's lithium mine) has not yet been actually landed. Previously, the company had signed a contract with the local government and obtained a lithium resource quota until December 31, 2030, which will not change. In addition, assuming that Chile's lithium mine nationalization policy is implemented, how to deal with the mining equity acquired locally(the Chilean government) also needs to give a specific plan.
A domestic commodity market information supplier analyst told Times Finance on January 10 that for enterprises, the biggest risk is whether the policy will affect resource development and normal operation in the next period of time, and chile's above proposal may accelerate the speed of Tianqi Lithium and other enterprises in overseas layout.
Source | The nationalization process of Tianqi Lithium industry is still far away, and the "lithium mine" OPEC is also difficult to form
"Judging from Chile's domestic political environment and its leadership philosophy, the probability of the above proposal passing and taking effect is very high." Zhang Rui told times financial analysis.
It is understood that in December 2021, Gabriel Boric (hereinafter referred to as "Boric") was elected as the new president of Chile and will take office in March this year. During Boric's campaign, his intention to nationalize lithium mines led mining companies to be wary of them.
Chile's nationalized lithium mine is not the first of its kind. In the last century, SQM was nationalized and privatized during the reign of Chile's left-right government, and had a greater impact on private capital holding enterprises such as SQM. It is not surprising that Boric's rise to power and concept has made mining companies wary, and the current market is also worried about whether this will have a greater impact on the current new energy industry, where the supply of raw materials such as lithium ore is extremely tight.
"There is no abnormality in the overseas miners we are currently in contact with, and as long as the price is in place, the ore supply is relatively stable." A material supplier in Beijing recently told Times Finance. Some market views believe that in the short term, nationalization will have a limited impact on Chile's existing quotas, but in the medium and long term, chilean lithium supply will be limited to a certain extent, and there is uncertainty in the release of global lithium resources in the long term.
"It's still hard to nationalize." Another industry insider told Times Finance that "subject to technology, capital, economic conditions, etc., these countries do not have the ability to develop independently." So-called nationalization is likely to slow down the growth of local industries, and local miners are very vocal in their opposition. According to foreign media reports, the above proposal has caused dissatisfaction among mining industry organizations; some members of Chile's Constituent Assembly believe that the proposal may be adjusted or even abandoned.
Source | Tianqi Lithium
"The nationalization proposed in the above-mentioned proposal in Chile may differ from the nationalization in the impression of the Chinese people." In response to a series of propositions by Boric and the recent relevant proposals of the Chilean government, Zhang Rui believes that it is more likely to adopt partial control, shareholding joint ventures and other methods to increase the nationalization rate of the entire industry, increase the royalties of the mining industry, or tax at anchor prices. Essence Securities also believes that the Chilean authorities can follow Australia's example, control the proportion of foreign capital to achieve control over resources, and at the same time through higher taxes, royalties and other ways to obtain benefits.
In fact, in the context of the new energy wave, the voice of nationalizing lithium resources has also appeared in many countries and regions such as Australia and Mexico.
In addition, according to the Rio Times, Argentina, Bolivia and Chile are discussing the establishment of an organization of lithium-producing countries similar to the Organization of the Petroleum Exporting Countries (OPEC). Public data show that in 2020, Argentina, Bolivia and Chile accounted for about 60% of the global lithium resources.
"In the short term, the probability of lithium ore version of OPEC molding is not large." Zhang Rui analyzed that Latin American countries have long been keen to put forward multilateral cooperation initiatives, but there are not many real promotions; lithium mining in Latin America is subject to foreign funds and technology; although the "lithium triangle" is rich in reserves, the actual mining and production are far inferior to Australia, and it is difficult to coordinate the relationship between them; moreover, the strength of Latin American powers is relatively balanced, and there is a lack of leadership countries to promote effective cooperation.
"It's hard to agree on quotas, pricing, etc." The aforementioned industry insiders are not optimistic about this, he said, "Now is the seller's market, the situation is very good, the driving force to promote the so-called 'lithium mine version of OPEC' molding is not strong, everyone must want to make more money on the upward cycle."
Zhang Rui added that the idea of "lithium mine version of OPEC" represents the trend of Latin American mineral countries hoping to strengthen regional coordination and expand their pricing power in the international market, which will gradually strengthen and will have more impact on the lithium ore market in the future.
Supply and demand continue to mismatch, and lithium prices have risen in a straight line
As the industry insiders said, today is the seller's market of upstream lithium resources.
As early as the end of October last year, Pilbara, a major Australian lithium mining company, conducted the third spodumene concentrate auction on the BMX electronic platform, and the final price of the auction reached 2350 US dollars / ton (FOB). According to the ore auction price, Shanghai Nonferrous Metals Expects the cost of lithium carbonate to rise to 172,500 yuan / ton. At that time, the average transaction price of battery-grade lithium carbonate in the domestic market was 192,500 yuan / ton.
"This is market behavior, not the result of human manipulation." For the soaring ore prices, some miner insiders told Times Finance, "We are a cyclical industry, around 2019 a large number of overseas miners went bankrupt, we also had a very miserable time." In the past two years, the downstream demand is strong, the amount of demand has gone up at once, we have no time to react upstream, and under the relationship between supply and demand, the market result of the rapid rise in ore prices."
"The price of ore is rising too much, and the cost is rising. In the past, lithium mica was only a thousand yuan a ton, and now it is more than five or six thousand." A lithium salt merchant in Jiangxi complained to Times Finance, "Although the price of lithium carbonate has risen a lot, the cost has risen more, and our midstream profits have been continuously compressed." Different from small enterprises in the industrial chain like ours, even if the price of ore and materials continues to rise, the manufacturers with mineral resources in Ganfeng Lithium and Tianqi Lithium will be very moist."
CITIC Securities pointed out that the rapid rise in lithium prices in 2021 has triggered concerns about resource supply and cost control in the downstream of the industrial chain, and integrated lithium producers with mine resources have both supply and low-cost advantages, and the status of the industrial chain will continue to strengthen in the future, and the profits of the industrial chain will gradually concentrate on it, fully benefiting from the upward price of lithium.
Ganfeng Lithium and Tianqi Lithium have successively released their 2021 annual performance forecasts. Among them, Ganfeng Lithium expects that the net profit attributable to the shareholders of listed companies in 2021 will be 4.8 billion yuan to 5.5 billion yuan, an increase of 368.45% to 436.76% year-on-year, and it is expected that the net profit after deducting non-deductions for the whole year will be 2.9 billion yuan to 3.6 billion yuan, an increase of 621% to 795.04% year-on-year. Tianqi Lithium expects to achieve a net profit attributable to shareholders of listed companies of 1.8 billion to 2.4 billion yuan in 2021, which exceeds market expectations.
In order to seize the upward cycle of the industry, upstream miners are also stepping up expansion and expansion, but it takes a long time for construction projects to finally achieve output. In addition, the mainland's lithium ore mainly comes from imports, but the repeated overseas epidemic situation has led to the expansion progress of overseas miners not as expected. Among them, Australian lithium miner Allkem has postponed the commissioning and first production of its Sal De Vida mine until the second half of 2023 due to mining permits and related problems caused by the epidemic.
According to the data of the business agency, some lithium salt manufacturers currently quote battery-grade lithium carbonate at 400,000 yuan / ton. Previously, some domestic securities companies expected that battery-grade lithium carbonate would rise to a high of 500,000 yuan / ton. Australian lithium miner Allkem recently said it expects lithium carbonate prices to rise by 80% in the second half of the fiscal year ending June from the first half of the fiscal year due to the surge in demand for metals for electric vehicle batteries.
According to the data of the Association of Passenger Vehicles, the global sales of new energy passenger cars in the narrow sense reached 6.23 million units in 2021, an increase of 118% year-on-year, and the world share of New Energy Passenger Vehicles in China reached 53%. According to Cui Dongshu, secretary general of the Association of Passenger Vehicles, the original sales of new energy passenger vehicles in 2022 were expected to be 4.8 million units, and should now be adjusted to more than 5.5 million units, and the penetration rate of new energy passenger cars will reach about 25%. New energy vehicles are expected to exceed 6 million units, and the penetration rate of new energy vehicles is about 22%.
In the view of industry insiders, in the short term, the mismatch between supply and demand of lithium resources and the tight supply of power batteries in the world will be the biggest obstacle to the development of new energy vehicles. Although almost all power battery factories are expanding production and expansion, whether they can meet downstream demand in a short period of time still needs to be a question mark.
"The mismatch between supply and demand of lithium resources is the main theme in the next two years, during this period, lithium prices will continue to rise, and the future market belongs to enterprises with resources to ensure production." Some insiders said. This also means that in the short term, the current tight supply of lithium resources in the new energy automobile industry will not change significantly in the short term.