The Zhitong Finance app learned that Huaxi Securities released a research report saying that looking ahead to 2024, the expectation of an oversupply of lithium salt has become an industry consensus. Downstream material factories and battery manufacturers are likely to adhere to a high-frequency procurement strategy with low inventory and small orders to prevent the risk of falling inventory prices. In this context, the price of lithium salt may continue to be low until supply is cleared or the growth rate of industry demand accelerates and returns to an equilibrium state. Based on the above reasons, the bank recommends focusing on companies whose cost curve is in a lower position in the industry and whose supply will continue to increase in the next 2-3 years.

Huaxi Securities issued the following views:

Looking ahead to the supply of overseas lithium resources over the next two years, in terms of spodumene mining, without considering the inflow of informal projects and the sale of DSO from some early projects, according to statistics, it is estimated that the total contribution of overseas spodumene concentrate will increase by 128,900 tons of LCE in 2023, an increase of 40.15% over the same period last year. In 2024, overseas spodumene concentrate will add a total of 214,000 tons of LCE production, an increase of 47.58% over the same period; Overseas salt lakes are expected to increase lithium carbonate production by 563,000 tons in 2023, compared with the same period last year An increase of 23%. In 2024, overseas salt lake lithium carbonate production increased by 78,900 tons, an increase of 26% over the previous year. In summary, the total increase of overseas lithium resources in 2023 was 185,200 tons of LCE, an increase of 32.69% over the previous year; in 2024, the total increase of overseas lithium resources was 292,900 tons of LCE, an increase of 39% over the previous year. Looking ahead to 2024, most of the overseas spodumene mines and salt lake projects will be put into operation in 2024Q2-Q3, and 2024H2 will climb the slope, so 2024Q2 may have more incremental releases.

Looking ahead to the next two years of domestic lithium resource supply, the Lijiagou lithium mine project mining project has begun trial production. In 2024, Lijiagou is expected to bring an increase of 10,000 tons of LCE; the 3 million tons/year mining project in Dahongliutan, Xinjiang was postponed until the end of 2024; on the lithium mica end, key aspects of the Yichun project in the Ningde era were put into production and climbing one after another, and production will increase markedly in 2024; at the same time, production will increase markedly in 2024; at the same time, ““Attached Membrane+ Process” Annual output of 15,000 tons of calcination battery-grade carbonic acid The lithium replacement project entered the commissioning stage; on November 10, the Lagocuo Salt Lake lithium mine successfully completed the process and produced the first batch of battery-grade lithium hydroxide pilot products; the Zabuye Salt Lake Phase II 10,000-ton lithium salt project was completed on November 20; in summary, it is conservatively estimated that 2023-2024 domestic lithium carbonate growth will be 281,000 tons and 125,500 tons respectively (report released on October 11, 2023). Domestic lithium carbonate is expected to increase by 341,000 tons and 861,000 tons, respectively), and the Yichun region is rich in integrated raw materials processing enterprises. And it's difficult Tracking is not within the scope of statistics.

According to the bank's analysis, the estimated global supply volume for 2023Q1-Q4 (equivalent to lithium carbonate) is 20.39, 23.13, 25.63 and 265,600 tons, respectively, with a total supply of 957,000 tons of LCE, an increase of 21% over the previous year, an increase of 21% over the previous year, an increase of 208,200 tons of LCE over 2022, and an increase of 214,400 tons of LCE over the forecast released on October 11, 2023. In 2024, the total global supply of LCE is expected to be 1,372,800 tons, up 43.83% year on year, 418,400 tons of LCE from the 2023 forecast, and 332,600 tons of LCE in 2024 from the forecast released on October 11, 2023. The time is getting closer to 2024. The certainty of incremental projects tracked by the bank is being strengthened step by step, and the previous incremental guidelines have been raised.

Looking at terminal demand, according to the official WeChat release of the Passenger Vehicle Federation, the domestic NEV passenger car market sold 841,000 units in November, up 39.8% year on year, up 8.9% month on month. Cumulative retail sales in January-November were 6.809 million vehicles, up 35.2% year on year. The growth rate is in line with market expectations. According to statistics from the official websites of European automobile associations, 11 European countries (Germany, Britain, France, Italy, Norway, Sweden, Spain, Portugal, Finland, the Netherlands and Switzerland) reached 224,000 new energy vehicle registrations in November, a year-on-year decrease of 10.8%, an increase of 11.91% over the previous year. From January to November, the number of new energy vehicle registrations in 11 European countries reached 2,233,200, an increase of 17.69% over the previous year. The European region has maintained relatively rapid growth, but Germany and Spain will continue to further decline in NEV subsidies in 2024, and France will begin further implementation next year Strict subsidy review system. Italy said it will begin considering following the example of France in 2024. From 2024, Swiss electric vehicles will face the same 4% import tariff as other vehicles. Considering the above factors, the growth rate of electric vehicles in Europe may face a decline in 2024; according to Marklines, sales of new energy vehicles in the US in October were 118,200 units, up 35.19% year on year, down 12.44%. From January to October, sales of new energy vehicles in the US were 1,217,700 units, up 53.70% year on year, with the support of the IRA Act Although the market growth rate fell short of expectations, it is expected that it will probably slow down further next year.

Looking ahead to 2024, according to data from the Passenger Federation, retail sales of new energy vehicles totaled 6.809 million units in the first 11 months, up 35.2% year on year, and the cumulative penetration rate since this year has reached 35.2%. It is expected that next year, growth will continue to grow rapidly, but due to excessive base, growth will decline; European NEV registrations in 11 countries reached 2,2332 million vehicles in the first 11 months of this year, an increase of 17.69% over the previous year. From 2024, policy adjustments in Germany, Spain, Switzerland, France, etc. are expected to slow down the growth rate of the European market; from 2024, the US NEV sales volume is 121.77 Ten thousand vehicles, a year-on-year increase of 53.70%. Under the IRA law, the US NEV market is likely to slow down further next year.

In terms of price, as of December 7, the average ex-factory price of lithium hydroxide in Fastmarkets in China was 105,000 yuan/ton, down 11,000 yuan/ton from December 1; the average spot price of lithium carbonate in China was 95,000 yuan/ton, down 205,000 yuan/ton from December 1; Fastmarkets Japan and South Korea's average ex-factory price of lithium hydroxide was 17.00 US dollars/kg, down 8.33% from December 1; the average price of lithium carbonate in Japan and South Korea was $16.16/ 50 Kilograms, down 5.82% from December 1; the price of spodumene concentrate was 1,100 US dollars/ton, down 490 US dollars/ton from November 23.

Since this year, after the removal of lithium salt from February to April 2023, downstream materials factories and battery factories have been at a low level, and stocks of lithium salt and raw materials have been transferred to upstream lithium salt plants and mines. Currently, at the end of recent years, orders from downstream materials factories and battery manufacturers have entered a low season. Against the backdrop of a sharp drop in lithium salt prices this year, inventories are likely to still operate at a low level. Furthermore, looking ahead to 2024, the expectation of an oversupply of lithium salt has become an industry consensus. Downstream material factories and battery manufacturers are likely to adhere to a high-frequency procurement strategy with low inventory and small orders to prevent the risk of falling inventory prices. In this context, the price of lithium salt may continue to be low until supply is cleared or the growth rate of industry demand accelerates and returns to an equilibrium state.

Based on the above reasons, the bank recommends focusing on companies whose cost curve is in a lower position in the industry and whose supply is still increasing in the next 2-3 years. It recommends focusing on Yongxing Materials (002756.SZ), which has a 100% self-sufficiency rate for lepidolite raw materials. The beneficiary targets include Tianqi Lithium (002466.SZ), Salt Lake (000792.SZ), and Zangge Mining (000408.SZ).

Risk warning: 1) Global lithium salt demand growth rate falls short of expectations; 2) Australian mine volume exceeds expectations; 3) Argentina's new salt lake project production progress exceeds expectations; 4) Yichun lepidolite concentrate release exceeds expectations; 5) African project volume exceeds expectations; 6) excessive inflow of informal projects; 7) global electric vehicle sales fall short of expectations; 8) global energy storage growth falls short of expectations.