Written by Zhou Zhou
Editor / Zhang Nan
Design / Ju Jia
On January 26, the latest data released by Shanghai Ganglian showed that the price of battery-grade lithium carbonate on that day was the same as the last time, with an average price of 97,500 yuan/ton.
This is the fourth consecutive day that the price of lithium carbonate has remained at 97,500 yuan/ton.
Recently, Australian mines have limited production and guaranteed prices, which has temporarily stabilized lithium prices.
Whenever there is a big change in lithium prices, the first to bear the brunt are new entrants, especially cross-border enterprises that want to get a piece of the pie.
The giants that have been in the market for many years, such as the lithium duo and CATL, are still expanding production according to the plan.
The production restriction does not mean that the supply is reduced. UBS analysis believes that the global lithium supply will increase by 40% in 2024, roughly increasing the supply of lithium carbonate by 1.4 million tons.
With the continuous increase in supply and the relative slowdown in demand growth, the industry expects lithium prices to fall to about 80,000 yuan/ton this year.
Limited production and price protection
Australian lithium mining companies with a weather vane role took the lead in limiting production and guaranteeing prices.
Australia's lithium miner Core Lithium announced on January 7 that it would suspend mining operations at the Grants open pit mine in its Finniss spodumene project in response to declining lithium prices, focusing on prioritizing inventory.
(The operation site at the Grants Mine.) Source: Cole Lithium official website)
The lithium miner said it still had 280,000 tonnes of spodumene in stock, enough for them to survive until mid-2024.
Cole Lithium is the only lithium miner in Northern Australia. Its Grants open pit mine, Australia's newest mine and the only mine outside of mining-heavy Western Australia, commissioned operations in October 2022 and officially produced and sold lithium concentrate in February 2023.
Kerr Lithium is Australia's first new lithium mining company in the last round (2020-2022) lithium price rise cycle.
The lithium mines invested in the lithium price upward cycle have finally been put into production, and these high-cost new mining companies will naturally bear the brunt of the fall in lithium prices.
In December 2023, Cole Lithium suspended its planned second mine, BP33, due to collapsing lithium prices.
Kerr Lithium's main customers include Tesla, Yahua Group and Ganfeng Lithium.
Albemarle, a veteran lithium miner, can't bear it.
Founded in 1887, Albemarle is currently the world's largest producer of lithium compounds, including lithium carbonate, lithium hydroxide, lithium metals, organolithium compounds, special lithium salts, etc.
On January 17, Albemarle announced a series of measures to deal with the lithium price surge, which can be broadly divided into three points: first, to postpone investment expenditures at the Mega-Flex lithium conversion facility in South Carolina and Albemarle Science Park in North Carolina, second, to start commissioning the lithium conversion unit at the Meishan project in China, which is expected to complete mechanical completion by the end of 2023, to complete the commissioning activities of Line 1 and Line 2 at the Kemerton light lithium oxide project in Australia and focus on the construction of Line 3, and third, to sell its lithium miner Liontown in Australia Resources (LTR), abandoning plans to build a fourth lithium processing line in a region of Western Australia.
(Albemarle's light lithium oxide project in Australia.) Source: Albemarle official website)
Liontown currently hosts two major lithium deposits in Western Australia, including the Kathleen Valley project, which is scheduled to start production in mid-2025, which is one of the world's largest and highest-grade hard rock lithium mines.
Liontown is one of Australia's largest lithium mine operators and a significant supplier of lithium ore to Tesla, Ford Motor Company.
Albemarle's suspension of mining spending on new projects and focusing on those that can be brought to production quickly is a move to adjust cash flow and cope with the downcycle when lithium prices plummet.
This is not the first time that mining giants have limited production and guaranteed prices.
From 2018 to 2020, lithium mine prices continued to fall. Australia's lithium mines have started a wave of production cuts, and production in 2020 has decreased by more than 30% compared with the high period in 2019.
Australia is the world's largest source of lithium resources and China's largest source of lithium imports, accounting for 47% and 55% of the global and Chinese lithium raw material supply, respectively.
In the first 10 months of 2023, China imported 82% of lithium ore from Australia, customs data showed. Therefore, every move of the Australian mine can affect the price.
Due to the rapid reduction of the production capacity of the supply side of Australian mines, the balance of supply and demand in the industry has gradually balanced. By the fourth quarter of 2020, the downstream demand grew rapidly, and the lithium price bottomed out, like a rocket, all the way up, and the price of lithium carbonate rose from less than 50,000 yuan/ton in less than 8 months to the highest point of 590,000 yuan/ton in November 2022.
Expand against the trend
Recently, the price of lithium concentrate was around US$950/t, down 88% from US$8,000/mt a year ago.
Lithium concentrate is the main raw material for the production of lithium carbonate and lithium hydroxide. Lithium carbonate and light lithium oxide are the raw materials needed to produce the most expensive components of electric vehicles, power batteries. As lithium prices fluctuate, EV batteries account for 40%-60% of the cost of electric vehicles.
On December 7, 2023, the price of battery-grade lithium carbonate in China fell to 120,500 yuan/ton, approaching the 120,000 yuan mark, hitting a new low in more than two years.
(Chinese battery-grade lithium carbonate and Australian lithium concentrate price charts.) Source: Bloomberg)
120,000 yuan/ton is the critical point of the complete cost of lithium carbonate production by some listed lithium battery companies in China.
Seeing this, some newcomers "called in the gold".
FOR EXAMPLE, HUATI TECHNOLOGY, WHICH FOCUSES ON NEW URBAN SMART SCENES AND LIGHTING, MADE A DECISION ON THE EVENING OF JANUARY 19 TO TERMINATE THE SUBSCRIPTION OF 85% OF THE STAKE IN KYUSHU RESOURCES (SA) IN MOZAMBIQUE AND INVOLVE INVESTMENT IN LITHIUM MINING RIGHTS.
This comes just 23 days after Huati Technology announced a US$3 million acquisition of a stake in a mining company in Mozambique. The reasons for Huati Technology's abandonment of the acquisition of new mines in Africa include "the inability to agree on important terms, the continued decline in lithium ore prices and the uncertainty of low operating hours".
In the second half of 2023, GCL-ET and Sinomine Resources announced the termination of their lithium resource investment plans in Zimbabwe and Mongolia.
A person related to a lithium mining company commented on the auto business that in fact, from the third quarter of 2023, there will be news of the suspension of production of some lithium mines in China, and by the end of the year, the number of manufacturers who have reduced production and stopped production will further increase. Most of these manufacturers are cross-border new companies that will enter at high prices in 2022 and 2023, and there are more than 30 listed companies alone.
SMM data shows that as of December 2023, the monthly operating rate of domestic lithium salt enterprises has dropped to 46%, and many companies are facing the fate of being eliminated.
In the eyes of other mining giants, this is much better than the 40,000 yuan/ton at the worst.
Ganfeng Lithium, one of the "lithium industry duo", is expanding production against the trend.
In the future, Ganfeng Lithium's spodumene concentrate supply from Australian lithium producer Pilbara will increase from 160,000 mt/year to 310,000 mt/year in the next three years, and the selling price will follow.
Li Liangbin, chairman of Ganfeng Lithium, in his New Year's speech in 2022, said: "The cyclical nature of lithium carbonate products is very obvious, 200,000 yuan/ton yesterday, or 40,000 yuan/ton tomorrow sooner or later." ”
This shows that Ganfeng Lithium has long been unfazed by the cyclical fluctuations of lithium mines and has promoted its corporate strategy step by step.
Tianqi Lithium, another "male" of the lithium industry, was almost bankrupt and reorganized because it spent huge sums of money and huge debts to acquire 23.77% of the Class A shares of Chilean SQM Lithium Salt Company during the 2018-2020 lithium price downturn.
SQM Lithium Salt, which Tianqi Lithium currently holds a 22.16% stake, is the world's second largest lithium salt company, and Tianqi Lithium is its second largest shareholder.
The drop in lithium prices not only caused SQM's financial profit in the third quarter of 2023 to plummet by 56.42%, but also caused its market value to evaporate by $1 billion on the day of the earnings report.
Despite this, SQM does not intend to reduce production. Although the public road to South America's largest salt flat was blocked due to local protests starting on January 10, the giant is still working at full capacity to build up its inventory.
SQM executives believe that in the long term, demand for electric vehicles will rebound from the current weakness, and ensuring sustainable operations is the company's most important goal.
(SQM's lithium brine project.) Source: SQM official website)
According to the financial report data, as of the third quarter of 2023, a total of 27 A-share companies have been included in the concept of lithium mines, with an average year-on-year decline of 3.43% in revenue and an average year-on-year decline of 63.47% in net profit in the first three quarters.
Among them, the net profit attributable to the parent company of Ganfeng Lithium and Tianqi Lithium was 6.01 billion yuan and 8.099 billion yuan respectively, a year-on-year decrease of 59.38% and 49.33%. From the perspective of market capitalization performance, the market value of the two heroes shrank by about 60% and 40% respectively.
Despite the shrinking profits, the relevant people of the above-mentioned lithium mining enterprises commented on the automobile business that with the development of technology in recent years, salt lake lithium extraction enterprises have a cost advantage, and the complete production cost of producing lithium carbonate can be controlled at 40,000-50,000 tons, which is still profitable.
Zhang Yongwei, vice chairman and secretary general of the China Electric Vehicle 100 Association, also commented on the auto business that after looking at the expectations of some listed companies that make (lithium battery) materials, these companies feel that the current lithium carbonate price is acceptable.
The rise and fall of lithium carbonate prices directly affects the cost of battery companies and new energy vehicle companies. Zeng Qinghong, chairman of GAC Group, and Zeng Yuqun, chairman and general manager of CATL, both said at the 2022 Global Power Battery Conference that they "have become working for lithium mining companies".
In order not to be controlled by others in the upstream, CATL and mainstream car companies are locking in lithium resources.
CATL is also bucking the trend to expand upstream production capacity.
On January 17, the CATL-led consortium (CBC) and Bolivia's National Lithium Company (YLB) formally signed an agreement to build a pilot plant. Under the agreement, CBC will develop its salt lake lithium resources in Uyuni and Oruro and build two lithium extraction plants to bring the annual lithium carbonate production capacity to 50,000 tonnes.
In addition, CATL is also bidding with BYD for Canadian lithium miner Sigma.
Domestically, UBS analysis said CATL's large-scale lithium mine project in Jiangxi province will contribute 40% of China's lithium carbonate increment in the next two years.
The project is a 45 million tons/year ceramic clay (lithium-bearing) mining project invested and constructed by CATL in Yichun, Jiangxi Province in April 2022. The prospecting rights of the mine cover an area of 6.44 square kilometers and the inferred associated lithium metal oxide volume reaches 2,656,780 tons.
Zhang Yongwei commented on the automotive business, saying that power battery companies have not stopped expanding production during the three-year lockdown period of the epidemic (2020-2022), investment is soaring, and production capacity will begin to be released in 2024, and batteries will face a more prominent supply contradiction. Therefore, the agency generally does not expect the price of lithium carbonate this year, and gives a forecast of less than 100,000 yuan/ton.