For more than a year, the price of lithium carbonate has staged a roller coaster trend, falling from a high of 600000 yuan/ton in 2022 to a low of 97000 yuan/ton in 2024. "Production reduction" "shutdown" "market is not good" ...... has become a hot topic in the streets of Yichun, known as the "Asian lithium capital" city.

Recently, a reporter from China Securities News conducted an on-the-spot investigation on a number of lithium carbonate production enterprises in Yichun and found that the price of lithium carbonate has fallen sharply, relevant enterprises have been seriously affected, and production reduction and suspension are frequent. In 2024, the oversupply of bureau fabrics is difficult to change, the industry "grinding bottom" road will continue. In the long run, in order to avoid market risks, enterprises should increase their efforts to obtain resources, and at the same time build a complete industrial chain through a variety of ways to improve their ability to resist the risk of market fluctuations.

　　Enterprises cut production and stop production

"When the price of lithium carbonate was good in 2022, the truck that pulled goods on the 220 National Highway passing through Yichun was often stuck in traffic. Now, there is one in the past half a day, and most of them are passing cars from other places." Local network about car driver long master pointed to a speeding truck told reporters.

Huaqiao Village, Xinfang Town, Yichun City, is the most concentrated area of the local lepidolite concentrator. There are more than 10 concentrator plants, large and small, on both sides of the Taohua section of the highway about 1 kilometer long.

The sharp drop in the price of lithium carbonate has had a serious impact on these small concentrators in the processing sector. The reporter visited on the spot and found that at present, only 2-3 enterprises have their doors open, and the rest are closed. In a factory called Xinfang Stone Powder Factory, a thick layer of ash fell on the equipment. "Stop, stop, nothing to see." The gatekeeper pointed to the piles of spodumene and lepidolite and said, "These ores are still shipped from Africa and have been piled up for several months."

"There are more than 10 enterprises in Xinfang Town that do OEM beneficiation, and many of them have stopped production because they lose money as soon as they produce. Some enterprises only build factories in 2022 and start selling equipment in 2023. The price of lithium salt has been falling, and processing enterprises are afraid to buy mines, and many of them have closed down." The owner of a concentrator in Xinfang Town told reporters that his factory is now barely maintaining production.

In fact, from lithium ore, lithium salt processing and production to the trade side, many enterprises in the industrial chain have been hit hard in this round of lithium carbonate price exploration.

"In 2023, the lithium carbonate market fluctuated greatly, far beyond our imagination. Originally, I thought it should fluctuate in the range of 150000 yuan -200000 yuan per ton, but I didn't expect it to fall directly to around 100000 yuan per ton." Wang Yingchun, chairman of Jiangxi Saiku New Materials Co., Ltd., a lithium battery material recycling company, told a reporter from China Securities News.

Since 2023, the price of lithium carbonate has dropped from 510000 yuan/ton at the beginning of the year to 180000 yuan/ton in April, and then rebounded to around 300000 yuan/ton at the end of June. However, after the listing of lithium carbonate futures in July, the in stock market price fell all the way again. Entering 2024, the price of lithium carbonate continued its downward trend, falling all the way to this downward low of 97000 yuan/ton. After entering March, it began to rebound slightly. As of April 12, 2024, the spot price was 112500 yuan/ton; the lithium carbonate futures 2404 contract was 111600 yuan/ton, a decline of 55% since its listing.

The production cost of lithium salt is upside down. "Under the pure trade mode, the lithium salt factory needs about 10% gross profit margin to maintain normal operation. Now it is difficult to cover the cost of the products produced by buying resources from the mine side." Li Zhiheng, executive deputy general manager of Zhicun Lithium Industry, said, "Enterprises that purchase lepidolite ore are more uncomfortable."

Many lithium salt plants have chosen to cut production and stop production to cope with the operating pressure brought about by falling prices.

Reporters from china securities journal came to Yichun Yinli New Energy Co., Ltd. (hereinafter referred to as "Yichun Yinli New Energy"), a subsidiary of Jiangte Electric Machinery, located in Binjiang Town, Yichun City. The roar of work could be clearly heard outside the factory. "At present, the production line here is basically normal, working 12 hours a day; However, the working hours of some departments over the second phase have been shortened from 12 hours to 8 hours." Yichun silver lithium new energy employees told reporters.

The relevant person in charge of another lithium carbonate manufacturer told reporters: "In the fourth quarter of 2023, the company's lithium carbonate production was reduced by more than 1/3 compared with the second and third quarters."

Some small lithium carbonate production enterprises choose to stop production. Wang Yingchun said that the price of lithium carbonate is close to or even lower than the comprehensive cost of most mica lithium enterprises, and the more processing and production enterprises do, the more they lose.

Part of the lithium carbonate production enterprises under the pressure of loss to maintain normal production. "If production is always stopped, the workforce will be scattered. Therefore, some processing companies maintain production without losing or losing as much as possible to ensure that employees have food." Wang Yingchun said.

Some traders have a serious backlog of products and significant losses. Qi Wen, an importer engaged in the trade of spodumene in Africa, told reporters, "the goods in the company's warehouse were all shipped back when the price of lithium carbonate was 300000/ton. They have been hoarded since July 2023. If there are too many losses in the current market, they simply will not be sold."

Wang Yingchun said that the ports of Xiamen, Shanghai, Guangzhou and Shandong now accumulate a lot of lithium ore shipped from overseas. "It takes 1.5-2 months for foreign ore to be shipped back to China. The decline in the market has caused the goods to depreciate while being shipped, and many traders have suffered serious losses."

　Power storage track

The price of lithium salt has skyrocketed and plummeted, making practitioners in it feel like a roller coaster ride.

In November 2022, the price of lithium carbonate rose to a high of 600000 yuan/ton. At that time, lithium salt manufacturers made a lot of money. Tianqi Lithium Industry and Ganfeng Lithium Industry, known as the "lithium mining duo", took the lead. In 2022, Yanfeng Lithium's net profit was 20.5 billion yuan, up 292 percent year-on-year, while Tianqi Lithium achieved a net profit of 24.125 billion yuan, up 1060.47 percent year-on-year.

In 2023, lithium carbonate prices fell sharply and the operating results of related companies fell sharply.

Wind data show that of the 18 lithium listed companies, 7 have disclosed their 2023 annual reports, and their net profits have fallen sharply. Yanfeng Lithium and Tianqi Lithium's net profit fell 75.87 percent and 69.75 percent year-on-year, respectively. Tianli Lithium Energy said that the price of lithium carbonate, the main raw material, fell sharply in 2023, especially in the fourth quarter. The price of lithium carbonate fell further, and the amount of provision for inventory decline was relatively large, resulting in increased losses for the company. It is estimated that the net loss in 2023 will be 0.35 billion yuan to 0.5 billion yuan.

Ganfeng Lithium's inventory amount in 2023 is as high as more than 8 billion yuan. Among them, raw materials 2.875 billion yuan, inventory goods 3.009 billion yuan, self-made semi-finished products 0.216 billion yuan.

At present, lithium resources are mainly used in power batteries and energy storage batteries, accounting for about 70% of the total. Changes in demand in these two areas will dominate the future direction of lithium prices.

From the perspective of the new energy vehicle market, the slowdown in growth has become an industry consensus. EVTank data shows that global sales of new energy vehicles will reach 14.653 million in 2023, an increase of 35.4 percent year-on-year. EVTank expects global sales of new energy vehicles to reach 18.3 million in 2024, a year-on-year growth rate of about 25 percent. According to data from the China Automobile Association, in 2023, China's new energy vehicle production and sales were 9.587 million and 9.495 million, respectively, an increase of 35.8 and 37.9 percent year-on-year. The sales of new energy vehicles in the Chinese market have accounted for more than 60% of the world, and the penetration rate has exceeded 30%. As penetration continues to increase, slower growth will become a trend.

At the same time, sales of hybrid models outperformed pure electric models. The battery capacity of hybrid models is relatively small, which will reduce the demand for lithium carbonate accordingly. According to data from the China Automobile Association, in 2023, my country's plug-in hybrid new energy vehicles achieved sales of 2.804 million vehicles, a year-on-year increase of 84.7; pure electric vehicles achieved sales of 6.685 million vehicles, a year-on-year increase of 24.6.

The relevant person in charge of a lithium carbonate company said in an interview with a reporter from the China Securities Journal that with the initial production capacity, the supply of lithium carbonate continues to increase, and the downstream demand cannot keep up. The two major application scenarios of lithium batteries, new energy vehicles and energy storage, have appeared. The growth rate slowed down.

The China Automobile Association predicts that sales of new energy vehicles are expected to reach 11.5 million in 2024, an increase of 20% year-on-year, and the growth rate will further slow down. Industry insiders believe that the stage of rapid development of the global new energy automobile industry has passed.

In this context, energy storage has become an important track for lithium battery companies. According to experts, energy storage is currently the second largest downstream demand industry for lithium, accounting for about 15% in 2023 and is expected to increase to 29% in 2024. In the long run, energy storage is expected to become an important engine driving lithium demand.

According to research data from the Energy Storage Research Institute (GGII), global lithium storage batteries shipped 225GWh in 2023, up 50% year-on-year. Among them, China's energy storage lithium battery shipped 206GWh, up 58% year on year. The global share of domestic corporate shipments increased from 86.7 percent in 2022 to 91.6 percent in 2023. China's energy storage battery "going out to sea" shows strong competitiveness.

In an interview with a reporter from China Securities News, Mo Ke, the founder of True Lithium Research, said that with the expansion of the global new energy grid-connected scale, the demand for supporting energy storage continues to increase. The scale of global energy storage installed capacity will grow rapidly in 2023, but energy storage batteries Capacity growth is faster than demand.

According to incomplete statistics, China's energy storage system integrators have an existing capacity of 232GWh, with a total planned capacity of more than 845GWh. In contrast, GGII statistics 2023 China energy storage lithium battery shipments 206GWh. Among them, the third quarter energy storage lithium battery capacity utilization rate is generally less than 50%.

In this context, the investment of lithium battery industry chain enterprises is more cautious. According to the incomplete statistics of the High-tech Lithium Industry Research Institute, in 2023, China's lithium batteries and four main materials (excluding copper foil, structural parts and other auxiliary materials) a total of 137 new planning projects, nearly half less than 2022. According to the statistics of 122 projects with announced investment amount, the total planned investment of China's lithium battery industry in 2023 is about 750 billion yuan, down more than 46% from 2022.

　Multi-measures to deal

"At present, it is expected that more than 40% of lithium salt production enterprises will lose money, and nearly half of lithium carbonate production enterprises in Yichun will stop production. At the same time, the upstream enterprises are lack of mining power." A lithium company responsible person told reporters.

According to Antaike's data, the global lithium resource development volume in 2023 is about 1.05 million tons of LCE (lithium carbonate equivalent), up 40% year on year. Among them, Australia produced 380000 tons, accounting for 36.2 per cent, South American salt lakes produced 260000 tons, accounting for 24.8 per cent, China produced 230000 tons, accounting for 21.9 per cent, and Africa produced 50000 tons of LCE, accounting for 4.7 per cent.

At present, the cost of Australian mines is at the world's leading level, and most projects will still operate normally in 2024, providing stable supply. The new projects in South America's salt lakes have greater potential, with more increments coming from Argentina. At the same time, Africa is expected to become the main arena for lithium mine expansion, which will have a greater impact on the balance of supply and demand in 2024. Anteco expects global lithium resources to increase by 350000 tons of LCE in 2024, higher than the increase in consumption in that year. Therefore, there is a high probability that the oversupply of lithium carbonate will continue in 2024.

The reporter learned from the survey that the recent Australian lithium mining enterprises have "supported the price" by reducing production and stopping production, which may bring certain support for the stabilization of lithium prices.

Huaxin Securities believes that the downturn in lithium prices will lead to a slowdown in the pace of new mining, and impact the relatively high cost of in-production mines, global lithium supply growth or open a downward channel. The expectation of oversupply of lithium salt in 2024 has become an industry consensus. Weak downstream demand overlaid with oversupply, oversupply situation in the short term or difficult to change.

In fact, many lithium mining projects have been suspended. China Mineral Resources announced on July 21, 2023 that the company intends to invest US $20 million to acquire 51% of the URT lithium project without reaching a final consensus with the relevant parties and decided to terminate. Tianqi Lithium Holdings, a subsidiary, terminated its acquisition of a 100% stake in Australia's ESS, and GCL has terminated its agreement with Zimbabwe, Zim-ThaiTantalum, to develop lithium resources. In addition, the positive material enterprise cold cobalt industry in December 2023 terminated two lithium-ion projects.

On January 5, 2024, the Australian lithium producer CoreLithium announced that it would suspend mining operations at its Finniss lithium projects in response to continued downward lithium prices. The CoreLithium design capacity is 173000 tons/year, and the first batch of lithium concentrate will be produced in February 2023. Public information shows that Australia is the main supplier of lithium mines in the world and China, accounting for 47% and 55% respectively.

A number of lithium salt enterprises said that with the decline in the price of lithium carbonate, high-cost production capacity is cleared, which is conducive to promoting the healthy and sustainable development of the industry.

Li Liangbin, chairman of Ganfeng Lithium, told the China Securities Journal: "On the one hand, lithium carbonate prices are too high, will inhibit downstream demand, price fall for downstream demand will bring a relatively large stimulus."

Lithium carbonate prices to maintain in what range is reasonable? Li Liangbin said, "upstream and downstream should have a reasonable profit margin, depending on the cost curve and demand situation."

Hu Shuchun, vice president of Chengdu New Materials Industry Research Institute, suggested that in view of the strong fluctuation characteristics of lithium carbonate prices, policy regulation should be strengthened to weaken and shorten the fluctuation cycle, and promote the healthy and orderly development of the industry.

Some lithium miners have changed their underwriting pricing to reduce risk. On January 29, Australian lithium miner IGO announced that the company, Tianqi Lithium and Yapo jointly owned the world's largest lithium mine Greenbushes, its long-term co-underwriting pricing model has changed and will be settled using the average lithium salt price (M-1) of the month before the shipment month. The previous settlement method was calculated by using the average price of lithium salt in the previous quarter.

Chen Xuesen, member of the Standing Committee of the Party Committee, vice chairman and spokesperson of the China Nonferrous Metals Industry Association, said that the lithium carbonate market is currently in a weak supply and demand pattern. In response to the sharp drop in prices, lithium salt companies can arrange equipment maintenance or production reduction according to their own costs. Implement flexible production, dynamically adjust the output of lithium carbonate products, and reasonably reduce lithium salt inventory; in terms of sales, lithium salt companies should focus on long-term orders. In the long run, in order to avoid market risks, enterprises should increase investment in exploration and acquisition of resources, and at the same time build a complete industrial chain through a variety of ways to improve the ability to resist market fluctuations.

CITIC Securities believes that due to the systematic rise in the production cost of Australian lithium ore and the flexible production and marketing strategy of enterprises, the scale of the current round of Australian mine production reduction does not rule out the possibility of further expansion.

Source: China Securities Journal reporter Li Yuan Luo Jing