Supply constraints of lithium ore in Western Australia: technical capacity and commissioning cycle, labor shortage and poor shipping. Aokuang is currently the main source of lithium concentrate in China, but its overall capacity expansion progress in 2021 is not in the same “channel” with the explosive growth of downstream global lithium battery materials and power batteries. In the super demand cycle, the immediate resource constraints promote the lithium salt price to continue to hit a record high. In 2021, the total lithium concentrate capacity of Australian lithium resource providers was 2.556 million tons, the same year-on-year, with a total output of 1.931 million tons, an increase of 32% year-on-year. Looking at the emerging lithium miners in Australia without talison lithium, they produced 976000 tons of lithium concentrate in 2021, with a year-on-year increase of 11%, and sold 1034000 tons of lithium concentrate, with a year-on-year increase of 19%; Among them, the output of 21q4 was 233700 tons, a year-on-year increase of only 3%, and the sales volume was 252800 tons, a year-on-year increase of 9%. Although pilgan in Pilbara and mtcatlin in allkem achieved full production in 2021, the resumption progress of the original Altura capacity is significantly slower than planned. Talison will fully open the fire in 2022. However, due to the capacity constraints of tlea and Yabao lithium salt and the preparation of lithium salt plant in Western Australia, the efficiency of incremental entry into the supply system needs to be verified. With regard to the low growth of production and sales of emerging Australian mines in 21q4, we expect that it is also related to the price negotiation of 22 years old, which leads to the shortage of raw materials for China’s lithium industry in 22q1 in the peak season after the holiday. Looking forward to the whole year of 2022, we expect that the total capacity of Australia mining will increase by 39% to 3.54 million tons year-on-year, and the total output will increase by 34% to 2.58 million tons year-on-year.
The key lies not only in quantity, but also in concentration; Lithium mines in Australia have entered the era of emerging giants from start-ups. After baldhill and Altura are cleared and integrated, only mtcatlin of Pilbara and allkem is left to sell minerals, and talison greenbushes and mtmarion only supply minerals to shareholders. At the same time, the volume and endowment of lithium mines in Brazil are limited, and the climate of mines in Africa has not yet formed. Therefore, the bargaining power of Australian mineral resources for downstream lithium salts has been significantly enhanced. We believe that when the supply side with high concentration is on the demand side with scattered and high growth, there will be a situation of “abundant resources and potential capacity, but the landing of production expansion is lower than expected” until the formation of more yuan supply pattern. Looking ahead, we believe that wodgina’s phased resumption of production in April (250000 tons of 750000 tons in the first phase) and the putting into operation of core Finniss at the end of the year will help to bring a certain degree of relief. Among them, it is very important to verify whether wodgina, which is jointly controlled by Yabao and MRL, will sell minerals to foreign countries. We expect that it is more likely to adopt the outsourcing mode and produce lithium salt products.
The five trends of Australia mining cannot be ignored: (1) the impact of the epidemic on supply chain and logistics efficiency has not dissipated, and it is not easy to shut down production capacity and resume production and put new production capacity into operation. However, after the opening of the border in Western Australia on March 3 this year, the tight labor force and low capacity expansion efficiency are expected to improve. (2) The spot price of lithium salt in China continues to hit a record high, and the “appetite” of resource providers for the long-term association price of concentrate has also increased significantly, which will be significantly increased quarter by quarter in 2022. With the expansion of mining and beneficiation activities, the cash cost of Australian mines will generally rise this year. (3) Australian mines are seeking to build a business framework of vertical integration from lithium mine to lithium salt. At present, the lithium hydroxide capacity to be put into operation and under construction in Western Australia has reached 148000 tons, and its increasingly strong financial strength has also strengthened the foundation for the strategic extension of Australian mines. (4) Once the dependence on China’s lithium salt plants was changed, aokuang began to pursue the formation of a more diversified global customer structure. European and American car enterprises and lithium batteries in Japan and South Korea were more favored. (5) Low carbon and ESG began to affect the development ideas of lithium mines in Western Australia. In addition to increasing the utilization of photovoltaic clean energy and reducing carbon emissions during transportation, it means that in the medium and long term, it tends to reduce the export of primary product lithium concentrate and extend the value chain.
Investment suggestion: under the price of nearly 500000 yuan / ton of lithium carbonate, it is more urgent to be vigilant against the “reverse bite” of high cost and purchase cash flow pressure on terminal demand, strengthen the development of China’s local lithium resources and build a global diversified resource supply system. It is suggested to continue to pay attention to Qinghai Salt Lake Industry Co.Ltd(000792) , Ganfeng Lithium Co.Ltd(002460) .
Risk tips: 1. High cost pressure slows down the volume of global new energy vehicles; The industrialization of sodium batteries or the rigid demand of partially diluted lithium in batteries; 2. Overseas mining policy risk, global geopolitical risk, global macro fundamental risk in the cycle of high inflation and fed interest rate hike.
