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on the evening of september 11, a person related to catl responded to reporters: "based on the recent lithium carbonate market situation, the company plans to adjust the lithium carbonate production arrangement in yichun, jiangxi."

previously, there were rumors in the market that catl would suspend its lithium mining business in yichun, jiangxi. influenced by this news, the a-share lithium mining sector surged on september 11, with many stocks such as tianqi lithium and ganfeng lithium hitting their daily limit.

some brokerage research reports analyzed that in the downward cycle of oversupply, the suspension or reduction of production at large mines is an important sign that the industry has bottomed out.

proposed adjustment of lithium carbonate production

according to the latest response from catl,it is currently planning to adjust its lithium carbonate production in yichun, jiangxi, rather than suspending production as rumored in the market.

people familiar with the matter said that catl has not yet implemented a production suspension and needs to wait for further communication and coordination before determining what measures to take next.

before catl responded, market rumors said that ubs group issued a research report saying that its analysts confirmed through multiple investigations that catl decided to suspend its lithium mica mining business in yichun, jiangxi after a meeting on september 10.

catl's lithium mining business in yichun, jiangxi province is mainly aimed at obtaining the mining rights of the lianxiawo mine in 2022 to ensure the supply of upstream key resources and materials required for its battery production.

according to industry insiders, lithium carbonate was in short supply in 2022, causing its price to rise sharply, even reaching 600,000 yuan per ton at one point. as a result, battery companies such as catl have deployed mineral resources upstream.

the jianxiawo mining area is the largest lithium mica mine in yichun, jiangxi. public data shows that the resource reserves of the jianxiawo mining area reach 960.25 million tons, with an average lithium oxide grade of 0.27%, equivalent to about 6.57 million tons of lithium carbonate equivalent.

at present, the first phase of the jianxiawo mining area has reached full production, with an annual output of about 42,000 tons of lithium carbonate. previously, securities analysts calculated that the production scale of the jianxiawo mining area could reach 200,000 tons of lithium carbonate per year based on the average lithium oxide grade.

ubs group's research report analyzed that catl's suspension of its lithium business in yichun, jiangxi province will lead to an 8% reduction in the monthly domestic lithium carbonate production, equivalent to a reduction of 5,000 to 6,000 tons of lithium carbonate equivalent (lce) per month.

is the lithium mining business already operating at a loss?

catl plans to adjust its lithium carbonate production in yichun, jiangxi province, mainly based on the recent market conditions of lithium carbonate.

on september 6, the price of the main lithium carbonate futures contract fell below 70,000 yuan/ton during the trading session, setting a new low since its listing.

some institutions have previously estimated that the cash cost of catl's lithium business is about 89,000 yuan per ton. some market institutions have also estimated that the cash cost of catl's jianxiawo mining area is about 100,000 yuan per ton.

data from shanghai nonferrous network shows that since mid-july, the spot price of lithium carbonate has been below catl's cost line.

in this regard, the outside world speculates that catl's lithium mining business may have been operating at a loss.

the reporter noticed that catl had already suffered the pain brought by the decline in lithium carbonate prices in the first half of 2024.

in the first half of 2024, the year-on-year decline in catl's operating income in the mining and smelting industry was greater than the year-on-year decline in operating costs, and its gross profit margin fell by 4.12 percentage points year-on-year to 7.81%, while the gross profit margin of the electrical machinery and equipment manufacturing industry increased by 5.05 percentage points year-on-year to 26.83%.

figure: industries and products that account for more than 10% of catl's operating income in the first half of 2024

the performance changes are more obvious among the two domestic lithium mining giants - tianqi lithium and ganfeng lithium.

in the first half of 2024, tianqi lithium's net profit attributable to shareholders of the parent company was -5.206 billion yuan, a year-on-year decrease of 180.68%; ganfeng lithium's net profit attributable to shareholders of the parent company was -760 million yuan, a year-on-year decrease of 113%.

will adjusting production benefit lithium prices in the long run?

regarding catl's adjustment of lithium carbonate production, many institutions have predicted that it will be beneficial to lithium prices in the long run.

on september 11, influenced by the above rumors and market opinions, the a-share lithium mining sector surged, with many stocks such as tianqi lithium and ganfeng lithium hitting their daily limit, and the price of the main lithium carbonate futures contract, which had been "falling continuously", once surged by more than 9%.

industry insiders believe that the above price changes are expected. previously, the price of lithium carbonate once fell sharply, and now is the peak season for lithium carbonate demand. if the production capacity is reduced, it will have a small impact on the price.

according to industry insiders, when the price of lithium carbonate fell to important levels such as 150,000 yuan/ton and 90,000 yuan/ton, lithium mining giants would take price-maintaining measures such as suspension of production and maintenance.

however, many institutions believe that the price of lithium carbonate may maintain a "oscillating bottoming out" trend in the future, and the oversupply market structure has not changed.

citic futures analyzed that the long-term oversupply of lithium carbonate has not changed, especially before the excess capacity is cleared, the price of lithium carbonate is unlikely to rise. the upward height of lithium carbonate prices is limited this time. once the price rises by more than 80,000 yuan/ton, a large number of companies will hedge.

citic futures further analyzed that it is the peak season for lithium carbonate demand, and the reduction in supply may lead to a short-term decline in inventory. however, the production schedule in october is expected to decline, and the domestic downstream demand will decrease thereafter. in addition, the demand for new energy vehicles in some overseas markets has not met expectations, and the market is concerned about the future demand for lithium carbonate.