Recently, there have been a lot of "big events" about the energy metal lithium carbonate!
Not so long ago, in China Shipbuilding (600150. SH) and China Heavy Industries (601989.SH) reorganized and merged into "China Shenchuan" not long after the news that the central enterprises reappeared in a major reorganization, this time lithium carbonate, the core raw material of lithium batteries in the highest growth of new energy vehicles in China in recent years. Salt Lake (000792. SZ) announced that on September 7, the actual controller Qinghai Provincial State-owned Assets Supervision and Administration Commission, the controlling shareholder Qinghai SDIC and China Minmetals and its subsidiaries signed the "General Agreement on the Establishment of China Salt Lake Group".
Judging from the announcement, there are mainly two aspects: one is that the State-owned Assets Supervision and Administration Commission of Qinghai Provincial Government, Qinghai State Investment Corporation and China Minmetals plan to jointly establish China Salt Lake Group, with a registered capital of 10 billion yuan, China Minmetals holds 53% of the shares, Qinghai Provincial Government SASAC holds 18.73% of the shares, and Qinghai State Investment holds 28.27% of the shares; On the other hand, it must be the purpose of the formation, on the surface it is to "accelerate the construction of a world-class salt lake industrial base and build a world-class salt lake industry group", but in fact, the deep-seated reason is likely to start from the price of lithium salt, and to stabilize the supply of lithium salt through the formation of a "super enterprise", and then control the price and export.
Why Salt Lake Lithium Extraction and Salt Lake Shares?
01 Lithium carbonate violently rebounded? It hasn't bottomed out yet
Just after the announcement of the establishment of "China Salt Lake", the price of lithium carbonate, which has been falling endlessly, has stabilized significantly. According to the price of the main lithium carbonate (LCM.GFE) at the futures end, the integration of central enterprises provides short-term support expectations. From the September 6 futures before the announcement fell below the integer point of 70,000 yuan/ton, the low touched a new low of 69,700 yuan/ton; After the announcement, from Monday to the past three days, lithium carbonate futures prices have rebounded significantly, with a three-day increase of nearly 9%, a single-day increase of 8.87%, and finally a close increase of 7.91%.
Futures are generally regarded as spot price expectations, and the reason for today's surge is mainly due to the online rumors that CATL's (300750. SZ) lithium concentrator will be shut down, and it is estimated that the monthly output of the three smelters will be 5-6,000 tons of LCE, which shows that the capacity change of lithium salt is more attractive to bulls than the integration of central enterprises.
When it comes to the spot price of lithium salt, the past two years have been a roller coaster, and it is still in a downward trend...... Especially in the last year, the price of lithium carbonate seems to have completely given up resistance. As of September 10, 2024, on the spot side, the prices of battery-grade lithium carbonate and industrial-grade lithium carbonate in the East China market have reached a new low of 72,500 yuan/ton and 69,000 yuan/ton respectively in the past three years.
Three months ago, as analyzed in the previous article, the reasonable price of lithium carbonate in lithium ore is likely to be 6-70,000 yuan/ton, which is inferred based on the overall cost price of the overall upstream lithium salt manufacturers at that time. Looking back on 2023, the average sales price of lithium carbonate in 2023 will be about 169,000 yuan/ton, and the production cost will be 46,600 yuan/ton; Another listed company that extracts lithium from salt lakes has lower costs, and Zangge Mining (000408. SZ) in 2023, the lithium salt revenue will be 1.980 billion yuan, the cost will be 386 million yuan, the sales volume will be 10,300 tons, and the average cost will be about 37,500 yuan/ton;
Looking at the head listed companies of "lithium mine extraction" technology in the following table, the former "lithium king" Ganfeng Lithium as an example, in 2023, the company's sales cost of lithium metal and lithium salt will be 21.4 billion, the annual sales will be 101,800 tons, and the gross profit margin will decline from 56% to 12.53%, and it can be roughly calculated that the ton cost of lithium salt is as high as more than 210,000 / ton, which is mainly due to the low self-sufficiency rate of lithium mines, and the self-sufficiency rate increased by only 40% last year; The self-sufficiency rate of Sinomine Resources reached 86% last year, and the cost per ton also improved significantly, from 120,000 yuan/ton in 2022 to 103,000 yuan/ton in 2023. Tianqi Lithium and Yongxing Materials are still relatively optimistic, with tons of costs of 61,300 yuan/ton and 53,000 yuan/ton respectively.
The gap is obvious, and although the price of lithium salt in 2023 will decline year-on-year, the average price is still at a high level of 262,800 yuan/ton, even the median is 245,000 yuan/ton. The core advantage of lithium extraction from salt lakes has always been that the cost is lower, but I didn't expect the gap to be so big, even if the taste of production is different, but the current market price trend is the same, and the key is that the decline in lithium salt in 2024 seems to have no intention of stopping at all.
First of all, at the end of last year, it completely "lost" the key price point of 100,000 yuan/ton. Based on the average tonnage cost of lithium extraction from lithium mines in 2023, it is estimated that the cost line of lithium extraction companies from lithium mines is about 100,000 yuan/ton. The performance changes in the first half of this year basically reflect this characteristic, and the salt lake lithium extraction company can still make money in the same period, after all, the cost is more than 40,000 yuan/ton.
As the supply of lithium ore continues to be loose, the overall global lithium carbonate production cost is also showing a downward trend. According to the brokerage research report, the current situation is that the cost of purchasing lepidolite to extract lithium is the highest, about 8-105,000 yuan/ton; The cost of lithium extraction from purchased spodumene is the second, about 7-100,000 yuan/ton; The cost of domestic self-supplied lepidolite raw materials for lithium extraction and the cost of domestic spodumene raw materials ranked third and fourth, respectively, at 7-85,000 yuan/ton and 65,000-80,000 yuan/ton, respectively; Lithium extraction from salt lakes is still at the bottom of the industry's cost, about 3.5-55,000 yuan/ton. In the first half of this year, according to incomplete statistical survey data, the ton cost of lithium extraction enterprises from salt lakes may have dropped to less than 40,000 yuan/ton.
02 The imbalance between supply and demand of lithium salt is difficult to reverse
Due to the rapid development of the new energy vehicle industry in the past few years, the demand for lithium battery technology has been driven, which in turn has led to the explosive growth of the upstream lithium salt-related energy metal industry. However, the frenzied expansion of production and imports in 2020-2021 soon led to an obvious surplus of lithium salt supply, and then the price of lithium carbonate began to gradually decline from nearly 600,000 / ton.
In the first half of this year, according to the statistics of the Lithium Branch of the China Nonferrous Metals Industry Association, from January to June 2024, the domestic lithium carbonate output was about 298,000 tons, an increase of 48.8% year-on-year, and the output in June was less than 60,000 tons, a slight increase from the previous month. June was mainly due to the continued decline in lithium carbonate prices, but still increased slightly.
Due to the high price of raw materials in the first two years, and the overall cost of lithium battery manufacturers, the current lithium salt price has plummeted, and many manufacturers can only operate at a loss or reduce production to digest the high cost (low-cost lithium salt competitiveness is bound to be stronger), and according to the brokerage data also illustrates the current contradiction, the output and operating rate of ternary materials from April to June this year have been declining.
The following table is the sorted supply and demand data and expectations, from which it can be seen that the gap is still there, and if the news of the shutdown of the Ningde lithium plant is true, it can only reduce the supply of less than 20,000 tons per quarter, and the gap between supply and demand is still there, and there is no obvious reversal of supply and demand.
(Data source: brokerage futures research report and industry data)
Looking at the terminal, energy storage and new energy vehicles are the main force to "digest" lithium salt production capacity, of which new energy vehicles are the top priority. After all, the domestic sales and export data of new energy vehicles in the past two years are very strong. The latest retail sales of new energy vehicles in August this year were 1.1 million units (data from the Ministry of Industry and Information Technology), an increase of 30% year-on-year and 11.0% month-on-month, and the penetration rate came to 53.9%, continuing to hit a record high, and the export of new energy vehicles in August was 110,000 units, a year-on-year increase of 22%. All three of these figures provide a stable demand support for lithium carbonate.
However, risks are also accumulating, on the one hand, the sales of domestic car companies are showing obvious differentiation, the original is the overall high growth of everyone is growing, and now gradually entering the stock market, behind the elimination of the other is the slowdown of the overall sales; On the other hand, the frenzied suppression of the export of new energy vehicles from the mainland in overseas markets has begun, and the tariff policy on China that has been implemented in the previous United States has ended, of which the tariffs on new energy vehicles have surged from 25% to 100%; Then on June 13 this year, the EU launched a countervailing investigation against China's imports of electric vehicles. These sanctions will inevitably affect the export data of domestic new energy vehicles in the future. The internal and external circulation is expected to contract, and these two potential negative factors will most likely hit the demand for lithium carbonate in the medium and long term in the future.
Based on the previous two points: the first is that the supply is easy to increase and difficult to decrease. Due to the huge difference in the shipping cost of lithium salts brought about by different technologies, the supply side of lithium salts has diverged and contradicted. Lithium carbonate enterprises extracting lithium from lithium mines fell below the cost line of 100,000 yuan/ton, and Tianqi Lithium and Yongxing Materials in lithium extraction from lithium mines can barely resist the decline and maintain production capacity by relying on complete self-sufficiency. But the problem is that even if the battery grade has fallen to 72,500 yuan/ton, and the industrial grade has fallen to 69,000 yuan/ton, the salt lake lithium extraction technology can still have more than 50% profit margin. This means that at a time when new energy vehicles and energy storage are still growing rapidly in the short term, lithium carbonate, as a core raw material, is basically not expected to reduce production and raise prices. Enterprises with cost advantages basically have no motivation to reduce production, and they can stubbornly bear the price of this wave of lithium salts to find the bottom; Secondly, the contraction of domestic sales and exports on the demand side mentioned above is expected to objectively affect demand, and the gap between supply and demand of lithium carbonate in the medium and long term is still difficult to reverse.
03 The new "lithium king", the country is not only for lithium
Purely looking at the supply and demand of lithium salt, I also choose Salt Lake shares.
On the supply side, the current total production capacity of Salt Lake Co., Ltd. is 30,000 tons, and the planned output will reach 40,000 tons in 2024, plus the 40,000-ton integrated lithium salt project under construction, the company's medium-term lithium salt production capacity will reach 70,000 tons. In terms of lithium salt production capacity, it can rank among the leading domestic salt lake lithium extraction enterprises. Later, it was merged by China Minmetals, and the subsequent Minmetals Salt Lake will also be injected into China Salt Lake Group, and its total lithium salt production capacity will be further increased to 80,000 tons; The second is profitability, which here is mainly based on extremely low cost advantages. In the downward cycle of lithium carbonate, the market value can still stabilize at about 80 billion, which shows the market's affirmation of its profitability resilience. In the first half of this year, the cost of about 33,000 yuan/ton made Salt Lake shares quite resilient to the decline in lithium carbonate prices.
And even if the medium and long-term is very pessimistic, the price of lithium carbonate falls to 60,000 yuan/ton, there is still 50% profit margin; Finally, looking at the demand side, Salt Lake shares are currently mainly in cooperation with BYD (002594. SZ) cooperation, in domestic sales, BYD is the one who grows in the position of the other, and it is the absolute leader, which is a fairly certain long-term guarantee for the company's capacity utilization.
In addition to lithium salts, a more important resource is potassium chloride. The data shows that there are only 11 enterprises with global potassium chloride production capacity of more than 2 million tons, mainly concentrated in Canada Nutrien, Belarus Belaruskali, Russia Uralkali and United States Mosaic, whose production capacity accounts for a total of 67.26%, and the industry has a high concentration of production capacity. In China, only Salt Lake Co., Ltd., Zangge Mining Co., Ltd., and Potassium International Co., Ltd. have a production capacity of more than 2 million tons, of which Salt Lake Co., Ltd. has a production capacity of 5 million tons, ranking first in China.
How important is potash? As a large agricultural country, the mainland has a very high demand for potash fertilizers, but its production capacity is relatively weak, and it has been in a trade deficit with potash fertilizers for a long time. This means that a large part of the cost of agriculture in the mainland's primary industry will be subject to imports. Therefore, the integration of domestic potassium chloride resources is very important for the stability of the supply side of potash fertilizer, and even has considerable combat readiness significance.