Cover credit: Pixabay
At the beginning of 2023, the price of lithium resources has changed dramatically. According to data from Shanghai Steel Union, the average price of battery-grade lithium carbonate fell by 2,500 yuan / ton to 469,000 yuan / ton on February 1 this year, and the price of industrial-grade lithium carbonate fell to 430,000 yuan / ton. The price of lithium carbonate fell by more than 100,000 yuan / ton from the all-time high average price of 590,000 yuan / ton in mid-November last year, a decline of nearly 21%.
In the past two years, the rapid growth of the number of electric vehicles has broken the balance between supply and demand of lithium, the core raw material of power batteries, and the price of lithium has soared. In November 2022, the price of lithium carbonate once exceeded the 600,000 yuan / ton mark. This tension extends from upstream raw material production to the entire automotive manufacturing industry. The once soaring lithium resources have attracted players from all walks of life to enter the game and stage a resource battle. The sharp rise and fall of lithium prices is a joy or sorrow for the new energy vehicle manufacturing industry?
01The protracted battle for lithium mines
The competition for lithium resources is not something that has only appeared in the past two years, as early as six or seven years ago, Chinese mining companies have begun to layout lithium mine development and production. However, due to the special mining and refining process of lithium mines, it takes up to three to five years for mining companies to explore, mine and refine usable lithium. In addition, there are many time-consuming and labor-intensive processes such as waiting for approval procedures and equipment installation.
Source: @财新网
The long cycle has led to a "vacuum period" between the production of upstream raw materials and the production of new energy vehicle batteries. Coupled with the rapid increase in the production and ownership of new energy vehicles in the past two years, manufacturers' demand for lithium has expanded unprecedentedly, resulting in a serious imbalance between supply and demand.
The competition for resources around lithium mines is not only a "must-fight" for domestic power battery manufacturers and new energy vehicle companies, but also is being carried out on a global scale.
The "big brother" of domestic power batteries, CATL, is competing for lithium mines in Qinghai and Sichuan in China, North America and Australia abroad; Automaker BYD explores mineral sources in Chile and Africa; New forces car companies are also investing in lithium mining companies at home and abroad.
Tight supply and demand and competition have caused lithium prices to soar, and have also driven the production of power batteries and the cost of vehicle manufacturing. In 2022, "Guidian" has become a major problem recognized by the new energy automobile industry as difficult to alleviate in the short term. The Ningde era, which is the leader of the domestic power battery market, once became the "creditor" of many car companies, and many car companies have complained that the soaring lithium price makes car companies "work for the Ningde era". This cost transmission has caused the burden of the entire industrial chain, and the rising costs and gradual loss of voice power have made things worse for most of the new energy vehicle companies that are still losing money.
02 The high level falls, do you still want to grab lithium?
At the end of 2022, the price of battery-grade lithium carbonate began to decline. According to data from Shanghai Steel Union, battery-grade lithium carbonate fell by 2,500 yuan / ton on December 13, and on the 14th, the price fell by 1,500 yuan / ton, and continued to weaken on the 15th, the price fell by 2,500 yuan / ton, and the average price was 557,500 yuan / ton.
This trend continues after the 2023 New Year, and the average price of battery-grade lithium carbonate continued to fall by 1,000 yuan / ton to 462,500 yuan / ton on February 7.
Source: Tencent News
Lithium prices have fallen at a high level at this stage, and some analysts believe that the current decline in lithium carbonate prices is a normal fluctuation with the off-season of the industry, and has not yet entered the price inflection point. However, there are also industry analyses that show that lithium production growth will be between 22% and 42% in 2023.
Chris Berry, president of House Mountain Partners, a battery materials industry consultancy, said: "The lithium market in 2023 will be what I call the production game. The consensus and what I believe is that lithium prices are expected to level off in 2023 and there may be some downside potential, but I don't expect any kind of price collapse. ”
In this regard, Sutu Cheku Research Institute believes that after the "vacuum period" of lithium resource production, the growth of lithium production will inevitably make the price soaring due to supply and demand fall to a certain extent, and even a period of "continuous decline" until the "steady state" of supply and demand balance appears.
Source: Pixabay
So, lithium prices fall and there may even be overcapacity, is it necessary for battery manufacturers and car companies to continue to deploy lithium mines?
Lithium, as "white oil", plays an important role in new energy production. For battery manufacturers, a stable upstream supply chain should be more important than the short-term rise and fall of raw materials. Whether battery manufacturers or car companies want to expand production scale and achieve quantitative production to reduce costs and increase efficiency, stable raw material supply must be the first factor that enterprises must consider.
03 Car companies' "respite"
We can see through the decline in domestic new energy vehicle sales in January 2023: due to the decline of China's new energy subsidies in 2023 and Tesla's "crushing" price reduction, domestic new energy vehicle sales have suffered a "black opening".
On January 13, the M5 EV and M7 models announced price adjustments, with the starting price of the M5 EV reduced from CNY 288,600 to CNY 259,800, while the M7 from CNY 319,800 to CNY 289,800, the highest reduction of CNY 30,000 for the entire series. On January 17, Xpeng officially announced that the price of the low-end model of Xpeng G3i dropped by 20,000 yuan, and the high-end model dropped by 30,000 yuan; All P5 models decreased by CNY 23,000, while the price of the P7 low-end model was CNY 30,000, and the price of the high-end model was reduced by CNY 36,000. Subsequently, many other new energy vehicle companies also joined the price reduction queue.
Source: AITO official Weibo
Some domestic new energy vehicle companies are still in a loss-making state, and such "forced" price cuts have caused a lot of damage to car companies. For automakers and consumers, the decline in the price of lithium carbonate due to the increase in supply has led to a decline in battery costs and vehicle manufacturing costs.
Cui Dongshu, secretary-general of the National Passenger Vehicle Market Information Association, said that due to factors such as the withdrawal of new energy vehicle subsidies to reduce market growth expectations, the price of lithium carbonate has fallen below 400,000 / ton at the futures end, and the cost of batteries in the next few months will inevitably decline significantly.
With the decline in lithium prices, perhaps these car companies can control the cost of the whole vehicle by reducing the cost of batteries, so as to obtain a breather. Judging from the recent production and sales targets announced by various car companies in 2023, the overall development of the new energy vehicle industry is still expected to be "fast and fast" and "inspiring".
For manufacturers who buy lithium during the high price period or waste lithium slag recycling practitioners, the sharp decline in lithium prices has dealt a great blow to them. However, from the perspective of the long-term environment of the entire industry, the price of raw materials falling back to a normal threshold and remaining stable is more conducive to the benign development of the overall format of the industry.
However, the supply side of lithium resources needs to plan for a longer term, strive to keep pace with the sales trend of new energy vehicles, and beware of temporary imbalance between supply and demand, burying hidden dangers for the entire upstream and downstream industries.
Wen | Qin Shaohua; Editor|Qin Shaohua