Event overview:
From March 16 to 17, relevant departments of the Ministry of industry and information technology, the national development and Reform Commission and the State Administration of market supervision organized a symposium on the operation of lithium industry, a symposium on the price rise of upstream materials of power batteries, industry organizations such as China Nonferrous Metals Industry Association, China Automobile Industry Association and China automotive power battery industry innovation alliance, as well as lithium resource development, lithium salt production, cathode materials Relevant principals of key enterprises upstream and downstream of power battery and other industrial chains attended the meeting.
Analysis and judgment:
Multi departments jointly held a symposium on the operation of lithium industry to jointly discuss the protection of industry resources.
From March 16 to 17, relevant departments of the Ministry of industry and information technology, the national development and Reform Commission and the State Administration of market supervision organized a symposium on the operation of lithium industry, a symposium on the price rise of upstream materials of power batteries, industry organizations such as China Nonferrous Metals Industry Association, China Automobile Industry Association and China automotive power battery industry innovation alliance, as well as lithium resource development, lithium salt production, cathode materials Relevant principals of key enterprises upstream and downstream of power battery and other industrial chains attended the meeting. The meeting listened to the production, expansion and sales of key enterprises, analyzed the bottleneck problems faced by the current resource development and expansion of production and supply, and fully exchanged views on the market price formation mechanism of lithium salt products, production and consumption, the impact on the power battery industry, policies and measures to ensure supply and stabilize prices in view of the recent sharp rise in the prices of lithium resources and lithium salt products. The meeting required that upstream and downstream enterprises in the industrial chain should strengthen the connection between supply and demand, work together to form a long-term and stable strategic cooperative relationship, jointly guide the rational return of lithium salt price, strengthen efforts to ensure market supply, and better support the healthy development of strategic emerging industries such as Shanxi Guoxin Energy Corporation Limited(600617) automobile.
Nearly 80% of lithium resources are dependent on the outside world. Without solving the resource guarantee ability, the price control ability is impossible.
The Ministry of industry and information technology is not the first time to express its views on the protection of lithium resources. As early as September 16, 2021, Xin Guobin, Vice Minister of industry and information technology, said in a video speech at the “third world new energy vehicle Conference (wnevc 2021)” held in Haikou City, Hainan province that the power battery, a key component of electric vehicles, is facing the guarantee of lithium, cobalt and nickel and other mineral resources and the pressure of rising prices. The Ministry of industry and information technology will strengthen the overall coordination of work and improve the efficiency of lithium, cobalt Nickel and other key resources support capacity to meet the needs of the fast-growing market. Since September 2021, the price of lithium salt has continued to rise. We must not say that the national policy has not paid full attention to it. On the contrary, the competent national authorities have always attached great importance to this issue. However, under the market-oriented operation of the global economy, the price is determined by the supply and demand structure, superimposed with the epidemic situation and inflation background, especially the external dependence of raw materials upstream of lithium salt is nearly 80%, and the price is not controllable as we wish. In order to ensure the global competitiveness of China Shanxi Guoxin Energy Corporation Limited(600617) automobile, realize the reasonable supply and price of key raw materials, and solve both the symptoms and root causes once and for all, the urgent need is to ensure the supply of China’s lithium resources and accelerate the development of China’s lithium resources, otherwise we are likely to encounter the same situation in the next economic cycle.
Qinghai and Jiangxi have achieved the goal of opening up when resources can be developed. The urgently needed spodumene resources in Sichuan really need to be promoted by national policies.
In terms of the distribution of lithium resources in China, more than 80% of China’s lithium resources are stored in salt lakes, distributed in Qinghai, Tibet and other provinces, and the lithium mica resources are concentrated in Jiangxi. At present, the development progress of salt lake resources in Qinghai and lithium mica resources in Jiangxi is accelerating. It can be said that if it can be opened, it can be opened. This part of resources belongs to the promotion of marketization and does not need the support of national policies, On the contrary, relevant national departments may be required to supervise the environmental protection in the development process. For spodumene resources, which are almost completely dependent on foreign countries, China has few impurities and high lithium grade. It is an indispensable raw material for high-end batteries. Although the development of Salt Lake mica is accelerating, it cannot replace spodumene. Most of China’s spodumene resources are distributed in Sichuan Tibetan areas. As of 2019, the proven lithium oxide resources are 4.6331 million tons, equivalent to 2.1522 million tons of metal lithium, accounting for about 80% of the country’s hard rock lithium ore, of which the overall predicted prospective resources of methyl card are 5 million tons, surpassing greenbushes in Australia, and is the largest spodumene ore in the world. However, due to the lack of overall management and scientific planning and weak mine infrastructure, the development and utilization of advantageous lithium mines are slow and highly dependent on imports. This part of resources really needs the support of the central policy in order to speed up the development progress and escort China’s new energy industry.
All countries are tightening the export policy of lithium resources. We cannot only see the price rise, but also see the crisis behind it.
On Friday, U.S. energy secretary Jennifer Granholm and Senator Joe Manchin will jointly announce a plan to develop lithium batteries in the United States to help the Appalachian region get rid of the coal economy. Manchin, from the coal state, is a long-term supporter of the coal industry. He has always been an opponent of Biden’s climate economic agenda. However, it recently issued a statement saying that it is worried that the United States’ dependence on China and other countries in the key part of the lithium-ion battery supply chain will threaten the energy security of the United States. It will work closely with countries to promote the localization of the battery supply chain in the United States, and the attitude change is not small. The Australian government will hold federal elections on May 21. Morrison said during his election in Western Australia, the main lithium concentrate producing region, on March 16 that he would use Australia’s advanced manufacturing initiative to help local mining enterprises extend the industrial chain, solve the problem of China’s leading key mineral and metal status, and help Australia occupy more parts of the global supply chain. Doug Ford, governor of Ontario, Canada, announced a strategic plan for “key minerals” on March 16. Key minerals include nickel, cobalt, lithium and platinum. The plan envisages that Ontario automobile manufacturers will produce 400000 electric and hybrid vehicles every year by 2030, powered by batteries made in the province and using minerals extracted and processed in Ontario. American carmakers in Ontario, close to Michigan and Ohio, General Motors (GM.N), Ford Motor Company (F.N), Honda and stellantis NV (stla. Mi) have announced plans to produce electric vehicles there. The Canadian government and the Ontario government also provide financial subsidies to enterprises. The new energy vehicle industry is the core emerging strategic industry of various countries competing for layout. The horn of global competition has just sounded, and the competition for upstream resources has just started. At present, the price rise of upstream lithium resources is only a market economy issue, but whether the upstream resources can be safely guaranteed in the future is a national energy security issue that deserves more attention.
From Q2 to July / August, the price of lithium salt is flat or slightly callback, which is determined by the supply and demand of the industry. Lithium salt does not have the fundamentals of price decline and continues to be optimistic.
Q2-7 / August is the off-season of downstream procurement, and the supply increases by about 20000 tons of LCE each quarter on a quarter on quarter basis. Q2 mainly depends on the increase brought by the resumption of production in Qinghai, the resumption of normal production after the maintenance of China’s hard rock lithium salt processing plant and the resumption of production in wodjina Q2. Q3 mainly depends on the increase brought by sqm expansion and other projects. Q2-7 / August will be a relatively stable time in 2022, and the price rate will be flat or slightly lower, This is determined by market supply and demand. Q2-7 / August is an off-season for procurement in history. Our expected trend is based on the premise that the downstream procurement habits have not changed, replenishment similar to 2022q1 will not occur, and only low inventory production will be maintained.
As for whether the price of lithium salt can fall sharply, we think the probability is very low. In the production of lithium salt in China, 65% of the cost depends on the price of lithium concentrate in Australia. At present, it is time for China’s lithium salt plant to negotiate the long-term package sales price of Q2 lithium concentrate with Australia in mid March. Platts energy currently evaluates the FOB price of Australian concentrate as US $5000 / ton. The increase of Australian concentrate will lag one quarter, but it will definitely rise. The cost of lithium salt plant has further increased. Under the condition of tight supply throughout the year, the price of lithium salt does not have the fundamentals of falling. It is expected that under the background of the continuous rise of lithium concentrate price in Australia, the price of lithium salt will be supported to maintain stability at a high level. In terms of new supply in 2023, in addition to the relatively certain growth brought by the reconstruction and expansion of old projects, the development progress of mines and Yichun in Africa are the elastic part of the supply increment in 2023. At present, it is not clear. Now it is expected that the trend of 2023h2 is still early. We believe that 2022q4-2023q1 does not rule out the price peak of peak season preparation period again.
Investment suggestions:
Lithium is an upstream raw material necessary for the vigorous development of electric vehicles for a long time in the future. Countries have transferred lithium resources to national strategic resources, which means that overseas acquisitions will be affected not only by previous geopolitics, but also by countries’ concerns about future industrial development. Overseas lithium resource acquisitions will become more difficult than before, and also affect the release speed of global medium and short-term lithium resource production, Lithium salt prices may remain high for at least two years in order to stimulate and accelerate the process of global resource development. As of March 18, 2022, the price of electricity and carbon has reached 517500 yuan. It is expected that in the future, with the release of production capacity at the end of Qinghai Salt Lake in March, the price will be flat or slightly lower, and there is no basis for a significant decline. 2022q4-2023q1 does not rule out the price peak in the peak season. Integrated enterprises with guaranteed upstream resources and incremental resources will enjoy the profit elasticity under the high price of lithium salt in 2022. It is recommended to pay attention to the mining and beneficiation project of Lijiagou spodumene mine under construction. In the future, [ Sichuan New Energy Power Company Limited(000155) ], which will work with Dagu Dongchuan energy investment to integrate and develop lithium resources in Ganzi and ABA, will benefit from [ Tianqi Lithium Corporation(002466) ], which has been increasing production in the next five years and can achieve large-scale output through OEM, and [ Youngy Co.Ltd(002192) ], which is promoting the 2.5 million T / a lithium ore beneficiation project in yuanyangba, with rich reserves of lithium mica resources, [ Jiangxi Special Electric Motor Co.Ltd(002176) ] is being processed for the exploration and mining of Xikeng lithium mica mine.
Risk tips
1) the development progress of lithium concentrate is less than expected;
3) the supply and demand of lithium salt have improved significantly, and the price of lithium salt has dropped rapidly
4) rapid expansion of lithium concentrate supply capacity in Australia.
