news

pictured is catl's yichun base

the lithium carbonate market, which is in the bottoming-out stage, is already quite sensitive to news.

on the day when ubs securities announced that catl's jiangxi lithium mine had stopped production, lithium carbonate futures surged 7.91%; the spot price directly rebounded to 1,000 yuan/ton; and many a-share lithium mining stocks rose to the daily limit. on september 12, catl publicly responded that the company had plans to adjust the yichun lithium carbonate production arrangement based on the lithium carbonate market situation. a reporter from the china times interviewed catl about whether the adjustment was due to losses in the lithium salt business, and the relevant person in charge said that there was no news to respond to.

zhang jinhui, senior researcher at xinluo information, said in an interview with a reporter from the china times: "it has now fallen below the cost price of most companies. the current price is unsustainable. the state's old-for-new policy, local subsidies, and the traditional peak season of september and october will drive prices to fluctuate upward." investing in upstream lithium resources is part of catl's improvement of the industrial chain. in terms of output, catl's lithium mines have limited impact on overall supply and demand. in the short term, it is good for miners to hold prices. smm data shows that lithium carbonate prices rose slightly week-on-week and are expected to fluctuate upward in the short term.

as for the series of chain reactions in the market, perhaps it is the expectation that lithium prices will return to rationality. when will the much-anticipated bottom of lithium prices come? for reference, lithium carbonate 2411, which represents future expectations, once fell below the 70,000 yuan mark. from the perspective of key lithium mine supply, low-cost lithium mines such as salt lakes are still profitable. hengli futures predicts that the price is unlikely to rise above 85,000 yuan/ton.

supply and demand tug-of-war

the news of catl's lithium mine suspension was first reported by ubs securities' research report. it is said that through multiple verifications, they confirmed that catl decided to suspend its lithium mica mining business in jiangxi on september 10. the research report shows that the reason is that catl's lithium business has been losing money for two months. ubs securities believes that catl's cash cost is 89,000 yuan/ton, and the spot price of lithium carbonate has been lower than catl's cost line since mid-july 2024, and said that this is a normal reaction from suppliers.

ubs securities believes that this is news that is conducive to the balance of supply and demand and lithium prices. if catl suspends its lithium business in jiangxi, china's monthly lithium carbonate production will be reduced by 8%, about 5,000-6,000 tons of lithium carbonate. it is expected that in 2024, lithium prices will still have an upward space of 11%-23%. also on september 11, jiangxi jiuling lithium industry also issued a notice that its mines and concentrators will be shut down for maintenance for 15 days and 10 days in september, respectively. according to hengli futures data, the impact of jiuling mining's maintenance on production is within 1,500 tons of lithium carbonate equivalent.

the market reacted enthusiastically to the suspension of production at jiangxi lithium mines. in the secondary market, lithium carbonate 2411, which fell to 69,700 yuan on september 6, rebounded strongly and soared to 78,500 yuan on the same day. the spot price of lithium carbonate also rose accordingly. in the downward cycle of oversupply, the suspension or reduction of production of large mines is an important sign of the bottoming out of the industry. this kind of rebound is not the first time this year. in january, news of production cuts and production obstructions at australian mines and chilean salt lakes also triggered similar market reactions.

although the research report is titled "china's lithium prices have hit bottom", ubs securities did not analyze the bottom price of lithium. the research report focuses on investment and givessalt lake sharesbuy rating.

catl's response did not specify specific measures to adjust production. in 2022, yichun mining, a subsidiary of catl, won the exploration rights for ceramic clay (containing lithium) in the zhenkouli-jianxiawo mining area in yifeng county for 865 million yuan. most of yichun's lithium mines are lithium-containing porcelain clay mines, and the grade of associated lithium oxide in the mines is relatively low, roughly around 0.28%-0.55%. the jianxiawo mining area has the lowest grade (0.28%), but it is the mine with the largest lithium carbonate reserves and annual production capacity, at 6.649 million tons and 69,000 tons, respectively.

for a long time, the contribution of mining and smelting business to catl's revenue has been relatively low, at around 1%-2%. in recent years, the price of lithium salts has plummeted, and the gross profit margin of this business has been declining year after year, from 19.86% in 2023 to 7.81% in the first half of 2024. the profit has dropped from 1.536 billion yuan to 205 million yuan, accounting for less than 1%. from a historical perspective, lithium mines are catl's reserve for dealing with high lithium prices. now there are cheaper lithium salts on the market, and catl also has other options for downstream production. at the beginning of september,yahua group(002497.sz) has just announced a battery-grade lithium hydroxide and lithium carbonate procurement agreement with catl, with the transaction renewed until the end of 2028.

hengli futures believes that it will take some time for the production cuts to be transmitted from the mines to the lithium salt plants, and coupled with the consumption of its own inventory, it will not immediately affect the spot market. if the impact of catl's production cuts is reflected after mid-to-late october, the impact on supply and demand may be limited. by then, the downstream restocking cycle will have passed, and the demand for lithium carbonate will be significantly reduced. before the end of the downstream procurement cycle at the end of september, prices may still be in a state that is vulnerable to news stimulation.

prices will continue to fall in the medium and long term

jiangxi is the main source of lithium mica in my country. lithium mines in the province are mainly distributed in hengfeng, guangchang, ningdu, yifeng, fengxin, shicheng and other places. according to data released by the ministry of natural resources, jiangxi's lithium resource reserves account for about 40% of the country's total, ranking first in the country. yichun city, jiangxi province and its subordinate jurisdictions have proven reserves of more than 2.58 million tons of lithium oxide, equivalent to about 6.36 million tons of lithium carbonate.

jiangxi's lithium resources have attracted many companies to invest here, forming a lithium battery industry chain of "lithium ore-lithium salt-lithium material-lithium battery-lithium application-lithium recycling", covering mining, mineral processing, lithium salt and lithium slag roasting. huatai futures data shows that in 2024, jiangxi's output in the first few months was 12,000-15,000 tons, accounting for about 35% of the country. in april 2023, it dropped to a minimum of 8,000 tons, and it is expected to decline further thereafter.

compared with overseas low-cost spodumene mines and low-cost lithium salt lakes at home and abroad, the cost of lithium mica mines is not yet advantageous.yongxing materials（002756.SZ）、jiangte motor(002176.sz) and other companies have also invested in lithium resources in jiangxi.oriental fortuneclient data shows that jiangte motor's lithium ore and lithium salt business has been losing money since last year. this year, the revenue scale of this sector has dropped sharply to 213 million yuan, with a loss of 70.4 million yuan and a gross profit margin of -33.02%. yongxing materials' lithium carbonate gross profit margin exceeded 70% last year. in the first half of this year, the gross profit margin of this business has dropped to 38.73%, and the revenue scale of lithium carbonate has dropped by 60% year-on-year.

the price trend still depends on the supply and demand relationship. many institutions believe that the supply pressure will remain throughout the year, and the price may fall in the medium and long term.

lithium mine supply is still far from being cleared, and supply and demand have not reversed. according to funeng futures data, the lithium mine capacity construction + ramp-up cycle is 1.5-2 years. the supply-side capacity will be gradually released from the end of 2022. in 2024, it is still in a large capacity expansion cycle. global primary lithium resources are expected to increase by 353,000 tons year-on-year to 1.35 million tons of lithium carbonate equivalent, an increase of 35%. among them, lithium ore and salt lakes contribute 233,000 tons and 123,000 tons of increments respectively.

according to statistics from the lithium branch of the china nonferrous metals industry association, in the first half of this year, the domestic production of lithium carbonate was about 296,000 tons, of which the production in june was close to 60,000 tons, an increase of 8% month-on-month. including lithium hydroxide, lithium chloride and other products, my country's lithium salt production is equivalent to 489,000 tons of lithium carbonate equivalent, an increase of 34.3% year-on-year.

under the premise that there is accumulated inventory that needs to be digested, it is not difficult to see the loose trend on the supply side, and short-term reductions may be quickly filled.

the demand side has actually maintained a considerable growth. according to data from the china automotive power battery industry innovation alliance, from january to august this year, the cumulative sales of power and other batteries in my country were 581.8gwh, a cumulative year-on-year increase of 42.1%. the sales of power batteries and other batteries accounted for 77.1% and 22.9% respectively. compared with the same period last year, the proportion of power batteries decreased by 10.2 percentage points. in august, my country's power battery installation capacity was 47.2gwh, a year-on-year increase of 35.3% and a month-on-month increase of 13.5%.

judging from the current situation, lithium prices are still some distance away from bottoming out. ubs securities predicts that in the long run, lithium prices will be supported at a lower price of $9,909 per ton (about 70,300 yuan per ton).

editor-in-charge: li weilai editor-in-chief: zhang yuning