The sharp rise in the sales price of lithium concentrate in Australia has strengthened the importance of its own resources. It is expected to help stimulate the rebound of lithium industry and accelerate the recovery of lithium supply chain.
Event: on April 1, 2022, Australian lithium producer allkem announced that the average sales price of lithium concentrate of its MT cattlin lithium mine in the second quarter rose to $5000 / ton. On April 5, Australian miner MINRES announced that it would start the first production line of wodgina lithium mine in May, restart the second production line (all 250000 tons) in July, and evaluate the restart time of the third production line and whether to build the fourth production line at the end of this year. At the same time, MINRES announced that its MT Marion lithium mine, a joint venture with Ganfeng Lithium Co.Ltd(002460) will expand its production to 900000 tons by the end of 2022.
The price of Australian lithium mine managers association has risen rapidly, and the cost pressure of Chinese lithium salt enterprises has increased. According to the announcements of Australian miners, the sales price of 22q1 lithium concentrate is US $22 Jinzai Food Group Co.Ltd(003000) / ton, and the month on month increase of Q2 is 100%. The average price of lithium carbonate in 21q4 and 22q1 Chinese markets is 422000 yuan / ton and 210000 yuan / ton respectively. The rapid rise in the price of lithium concentrate in Australia is the result of the sharp rise in the price of lithium salt in China in the first quarter and the continued tight supply of lithium concentrate in the future.
The production cost of lithium carbonate corresponding to the price of lithium concentrate of US $5000 / ton has exceeded 300000 yuan / ton. The cost pressure of China’s third-party smelters will increase significantly in the second quarter, and the profit per ton of lithium salt may decline month on month.
Wodgina’s resumption of production exceeded expectations, and the actual contribution increment needs to be tested. MINRES and Yabao originally planned to restart the first production line of wodgina lithium mine in April 2022. Stimulated by the continuous sharp rise in lithium prices, the resumption of production of the second production line was advanced to July this year, which is expected to bring an increase of 1 Ping An Bank Co.Ltd(000001) 20000 tons of lithium concentrate. However, the announcement shows that the products of wodgina lithium mine can only be used by the newly established joint venture between MINRES and Yabao. In view of the fact that the above joint venture has no lithium salt conversion capacity, whether the lithium concentrate after wodgina’s resumption of production can be successfully converted into effective supply remains to be tested. The impact of the acceleration of project resumption of production on the new supply of lithium in 2022 is expected to be limited.
MT Marion’s production expansion scale exceeded expectations, and the offtaker Ganfeng Lithium Co.Ltd(002460) may benefit significantly. In February 2022, MINRES and Ganfeng Lithium Co.Ltd(002460) jointly announced to expand the capacity of MT Marion lithium mine by 20% – 30%. The updated announcement shows that the capacity of the project can be expanded from 450000 tons to Shanghai Pudong Development Bank Co.Ltd(600000) tons in April 2022 and further expanded to 900000 tons by the end of 2022, equivalent to Shanghai Pudong Development Bank Co.Ltd(600000) tons of lithium concentrate capacity of 6% Li2O, about 80000 tons of LCE This will increase the equity production capacity of Ganfeng Lithium Co.Ltd(002460) in the project by about 15000 tons of LCE, significantly improve the company’s raw material self-sufficiency rate, and the company is expected to benefit significantly against the background of the sharp rise in the price of lithium concentrate.
The accelerated release of lithium resource supply helps to alleviate the anxiety of lithium supply. Since 2022, with the continuous rise of lithium price, Australian miners have accelerated the resumption and expansion of production, and the development process of lithium resources in China is also accelerating. We expect that the lithium supply increment in 2022 may slightly exceed our previous expectation of 18 Shenzhen Zhongheng Huafa Co.Ltd(000020) 0000 tons of LCE, reaching more than 220000 tons. The increase of output and the stabilization of lithium price will help alleviate the anxiety of the industrial chain about the supply of lithium resources.
Risk factors: the risk of lithium price falling; The high price of lithium leads to the risk that the downstream demand is less than expected; The sharp rise in the price of lithium concentrate is a risk that the cost of China’s lithium salt enterprises will rise more than expected.
Investment strategy: the sharp rise in the sales price of lithium concentrate in Australia has led to a rapid rise in the cost of Chinese lithium salt enterprises, and the importance of self owned resource protection has further increased. The continued sharp rise in lithium prices stimulates the accelerated release of the supply side, which is expected to alleviate the anxiety of the industrial chain about the supply of lithium resources. The lithium sector is expected to benefit from the recovery of sentiment and stop the rebound. Recommend Ganfeng Lithium Co.Ltd(002460) and Qinghai Salt Lake Industry Co.Ltd(000792) , and pay attention to Tianqi Lithium Corporation(002466) , Yongxing Special Materials Technology Co.Ltd(002756) and Sinomine Resource Group Co.Ltd(002738) .
