Investment Event: on April 27, Pilbara, an Australian lithium mining company, held the first spodumene concentrate auction this year on the BMX platform. The auction scale of spodumene concentrate totaled 5000 tons (+ / – 10%), with a grade benchmark of 5.5%. The final auction transaction price was US $5650 / ton (FOB), continuing to hit a record high.
The auction price of lithium concentrate continues to soar, or will support the lithium salt price in the second half of the year from the cost side. The price of lithium concentrate auctioned by Pilbara on BMX electronic trading platform reached US $5650 / ton (FOB), up 140.43% from the previous auction price of lithium concentrate of US $2350 / ton in October last year. If the lithium concentrate grade is 6%, plus the sea freight of nearly 90 US dollars / ton and other expenses, the price of this batch of lithium concentrate in China is expected to reach about 6264 US dollars / ton (CIF China). Based on the price of lithium concentrate as the raw material cost of lithium carbonate production in China’s lithium salt plant, the production cost of a single ton of lithium carbonate has reached nearly 400000 yuan / ton (including tax).
The lithium concentrate in this auction is expected to be shipped in mid June this year and transported to China for processing to form a lithium salt supply market, which will be launched as early as October. Although in the off-season of traditional downstream consumption in the second quarter, combined with the resistance of lithium battery manufacturers to high lithium prices and the deterioration of the epidemic in China, which forced the new energy vehicle manufacturers at the end of the industrial chain to stop production and reduce production, which affected the upstream demand, the price of lithium salt recently callback from the high point of 517500 yuan / ton to the current 475400 yuan / ton, after the epidemic eased, the new energy vehicle manufacturers and lithium battery enterprises resumed work and production, Accelerate production scheduling to make up for the loss of lack of work in the early stage and replenish the warehouse in the industrial chain. The demand for lithium salt in the upstream is expected to pick up, and the price of lithium salt may rise back to the high point in the early stage in the peak season of the third quarter. The high transaction price of the lithium concentrate auction of Pilbara electronic platform also shows the optimism of lithium salt manufacturers about the strong demand and price of lithium salt in the second half of the year.
The profits of lithium industry chain are transferred to the upstream mine again. Not only did Pilbara raise the price of lithium concentrate to US $5650 / T through the auction on BMX electronic trading platform (Pilbara’s average price of lithium concentrate in 2022q1 is US $2650 / T (CIF China SC6)), allkem also plans to increase the price of MT Catlin lithium concentrate from US $2500 / t in 2022q1 to US $5000 / T. At the end of last year and the beginning of this year, the price of lithium salt in China accelerated and increased significantly more than that of lithium concentrate, thickening the profit of 2022q1 lithium salt plant. Driven by the price of lithium salt, and the tight lithium resources are still the pain point of the whole industrial chain, the price of lithium concentrate of Australian mining enterprises in 2022q2 has increased significantly. On the contrary, the price of lithium salt is subject to downstream pressure, and the price difference between lithium salt and lithium concentrate has narrowed, which has transferred the industrial profits to the resource end at the most upstream of the industrial chain.
Investment suggestion: the first auction of Pilbara lithium concentrate this year has once again sold a sky high price. Driven by the cost, the lithium salt price will still be supported in the second half of this year. After the work and production in the downstream of the epidemic improvement industrial chain resume and enter the peak demand season, it is expected that the Q3 lithium salt price is expected to return to the previous high point, and the annual lithium price may remain at a high level of 4 Shenzhen Fountain Corporation(000005) 00000 yuan / ton. After the recent sharp decline in the collectivity of the sector, the 22-year valuation of most stocks in the lithium industry has been generally lower than 10x, and the lithium sector as a whole is undervalued. Once the market sentiment recovers, the lithium sector is expected to usher in a strong rebound, combined with the gradual resumption of work and production in the downstream and the stimulation of the auction price of lithium concentrate. While the shortage of lithium resources has become the pain point of the industrial chain, the accelerated rise of lithium concentrate price will transfer the industry profits to the upstream resource end of the industrial chain to the greatest extent, which will benefit the enterprises with lithium resources or high self-sufficiency rate of lithium resources. In the context of China’s policy of accelerating the development of lithium resources this year, Ganfeng Lithium Co.Ltd(002460) ( Ganfeng Lithium Co.Ltd(002460) ), Tianqi Lithium Corporation(002466) ( Tianqi Lithium Corporation(002466) ), Sinomine Resource Group Co.Ltd(002738) ( Sinomine Resource Group Co.Ltd(002738) ) Youngy Co.Ltd(002192) Youngy Co.Ltd(002192) )、 Yongxing Special Materials Technology Co.Ltd(002756) Yongxing Special Materials Technology Co.Ltd(002756) )、 Chengxin Lithium Group Co.Ltd(002240) ( Chengxin Lithium Group Co.Ltd(002240) )、 Sichuan New Energy Power Company Limited(000155) Sichuan New Energy Power Company Limited(000155) )、 Tibet Summit Resources Co.Ltd(600338) Tibet Summit Resources Co.Ltd(600338) )。
Risk tips: 1. The production and sales of new energy vehicles are less than expected; 2. The new capacity of lithium mine was put in faster than expected; 3. Lithium prices fell sharply.
