The Zhitong Finance App learned that Minmetals Securities released a research report saying that during the rebalancing phase, this round of the lithium industry's downward cycle may have experienced many relay shocks and repeated bottoming out. The game mainly focuses on: on the one hand, volume control and price insurance of mature production capacity are difficult to offset aggressive emissions from new entrants, and the global lithium supply response trend is irreversible, but the volatile low lithium price will also affect high-cost quantitative supply production plans and lead to an extension of the release cycle; on the other hand, continuously adjusted demand recovery expectations and highly careful procurement and preparation will lead to a smooth peak demand during the peak season, while demand in the off-season is even weaker. The bank believes that the precondition for lithium prices to bottom out and rebound is that terminal demand is trending and recovery, so that the industrial chain can only shift to expansionary procurement demand; until then, mature salt lakes, which are at the bottom of costs, may support the bottom of lithium prices.
Minmetals Securities's main views are as follows:
The global NEV industry chain is shifting towards “safety and development”, and strategic lithium insurance and supply has become one of the winners and losers.
The field of new energy vehicles is gradually becoming an important field of global gaming. On the one hand, a regional supply system dominated by the United States is gradually beginning to take shape, countries such as key mineral alliances will use their mineral and technological advantages to provide support, and China may face stricter foreign investment scrutiny and rights restrictions because it is recognized as a “concerned foreign entity”; on the other hand, countries with superior lithium resources are beginning to no longer stop at expanding the scale of existing mineral products, but use resources as a bargaining chip to expand relatively downstream to maximize resource value. As the world's largest lithium battery and new energy vehicle manufacturing center and the world's major automobile consumer market, China also needs to establish a high-quality global lithium resource supply system with diverse regions and resilience, and continue to improve the battery metal sector represented by lithium with supply control capabilities and pricing power.
China's overseas lithium resource layout options are limited, and competition for core resources will become more intense in the future.
In the midst of the struggle of major powers, most countries with a good mining environment and high-quality resources, such as Australia and Canada, are within the scope of influence of the “Five Eyes Alliance” represented by the United States, and it may be difficult for Chinese enterprises to reach the core; they can only increase goods/equity as much as possible and protect the existing rights and interests of Chinese enterprises; the South American triangle, Brazil, and Africa are relatively friendly, but risks and opportunities are equal. National risks are increasing day by day, and Saudi energy companies and traditional mining companies in Europe and America are also joining in. As mergers and acquisitions of lithium resources heat up, the influence of the “Belt and Road” and “bilateral trade partner countries” will become one of the important factors in the layout of Chinese mining enterprises. Chinese mining enterprises need to think about how to build an echelon asset portfolio centered on low-risk core assets, with multiple stages and complementary risk preferences, such as leveraging the respective advantages of state-owned enterprises/private enterprises and private enterprises to go overseas together, balance plans to deal with risks and policy risks in overseas countries, actively establish a responsible corporate image, and pursue high ESG development standards.
Priority is given to overseas lithium resource allocation in Argentina, Africa, and Canada.
The abundance of lithium in the earth's crust is not low, yet high-quality lithium resource projects that are both large-scale, high-grade, and easy to mine are still scarce around the world, and are unevenly distributed globally. The bank sorted out the resource endowments of 6 overseas continents and more than 8 countries with lithium resource advantages, planned resource production capacity, and potential risks/opportunities. It believed that in addition to traditional lithium resource countries such as Australia, Chile, and Argentina, the development of Africa, Canada, and Brazil accelerated markedly. The LCE production capacity of overseas lithium resources was nearly 800,000 tons in 2022, and production capacity increases of 440,000 tons, 390,000 tons, and 430,000 tons in 2023-2025, respectively. Among them, Argentina and Africa will be the main core incremental, followed by Australia and Canada. Europe and America may not be expected to start partial incremental investment until 2025. Chile's new national lithium strategy is expected to accelerate salt lake development and long-term production, with limited short-term increments. Bolivia's progress still needs to be observed, and Brazil's long-term prospects are relatively positive. Considering that most of them are greenfield projects, that initial climbs are difficult to achieve overnight, and that some long-term production capacity for which construction plans have not been announced are gradually clarified and put into production, an extension of the actual peak production period is already a probable event.
In the rebalancing stage, this round of downward cycles may experience many relay shocks and repeated bottoming out.
The game mainly focuses on: on the one hand, volume control and price insurance of mature production capacity are difficult to offset aggressive emissions from new entrants, and the global lithium supply response trend is irreversible, but the volatile low lithium price will also affect high-cost quantitative supply production plans and lead to an extension of the release cycle; on the other hand, continuously adjusted demand recovery expectations and highly careful procurement and preparation will lead to a smooth peak demand during the peak season, while demand in the off-season is even weaker. The bank believes that the precondition for lithium prices to bottom out and rebound is that terminal demand is trending and recovery, so that the industrial chain can only shift to expansionary procurement demand; until then, mature salt lakes, which are at the bottom of costs, may support the bottom of lithium prices.
Risk warning:1) If the release of global lithium ore supply exceeds expectations and the promotion of new energy vehicles is low at the same time, it will lead to another decline in the price center of lithium products; 2) If battery technology is innovated and industrialized, it will lead to significant changes in the technical path of new energy vehicles at home and abroad, reducing the lithium consumption of power batteries and energy storage.