The Zhitong Finance App learned that the growth rate of new energy vehicles slowed in 2023, and lithium salt prices “continued to fall”. Affected by this, the net profit of many lithium salt plants fell by more than 60% year on year. Yesterday, Tianqi Lithium (09696), Ganfeng Lithium (01772), Shengxin Lithium (002240.SZ), Yahua Group (002497.SZ), and Rongjie (002192.SZ) announced their 2023 performance forecasts. Net profit all showed a year-on-year decline of more than 60%. Among them, Shengxin Lithium Energy and Yahua Group had deterministic losses in the fourth quarter. The rest was between loss and profit.
Judging from the reasons for the decline in performance disclosed by various companies, the decline in the price of lithium salt products and preparations for depreciation of inventory products at the end of the year are common to poor performance in the industry. Even Tianqi Lithium and Ganfeng Lithium, which have sufficient lithium resources, were unable to escape the influence of the industry. Tianqi Lithium's net profit fell 62.90%-72.56% year on year, and Ganfeng Lithium fell 79.52% to 69.76% year on year.
In its performance attribution, Ganfeng Lithium said that due to the cyclical impact of the lithium industry, the growth rate of terminal demand slowed, and the price of lithium salt products dropped sharply, and the price drop in lithium ore raw materials was less than that of lithium salt and downstream products, leading to a decline in the company's gross margin. Furthermore, the company calculated asset impairment preparations for related assets in accordance with accounting standards, so the company's performance declined sharply year on year.
Tianqi Lithium said that in addition to being affected by industry commonalities, it is also affected by investment income. Among them, the 2023 performance of SQM, an important affiliate, is expected to decline year-on-year, so the investment income confirmed by the company in 2023 is lower than in 2022.
Looking at the fourth quarter, the five lithium salt companies mentioned above were all on the verge of losing money. Among them, Shengxin Lithium Energy and Yahua Group confirmed losses, while Tianqi Lithium and Rongjie shares definitely declined month-on-month. The price of lithium salt also experienced a decline in the fourth quarter. According to data from Longzhong News, the average price of Q4 battery-grade lithium carbonate was 142,000 yuan/ton last year, down 40.77% from the average price of 239,900 yuan/ton in Q3.
According to information, the price trend of lithium carbonate will continue to decline in 2023. At the beginning of the year, it fell all the way from 500,000 yuan/ton to 150,000 yuan/ton, and slightly rebounded to around 300,000 yuan/ton during the year, but continued to decline after July, breaking below 100,000 yuan/ton in the fourth quarter. On January 30, the Shanghai Steel Union released data showing that the price of battery-grade lithium carbonate was the same as last time, with an average price of 97,500 yuan/ton.
According to the industry, with the raw materials market for new energy vehicles being sluggish in the short term, the easing of global lithium resource-side supply is already a clear trend. According to data from global consulting agency Wood Mackens, it is estimated that more than 70% of the short-term increase in global lithium supply in the future will come from countries such as Australia, Chile, and China.
In the medium term, as greenfield projects in South America, Africa, North America, and China are gradually completed and put into operation, the global supply of lithium resources is expected to reach 2.34 million tons of lithium carbonate equivalent in 2032, the number of lithium resource supply projects will increase to 87, and the development of lithium resources will gradually become decentralized and diversified.
Under these circumstances, CITIC Securities pointed out that the reduction in Australian mining production was an important reason why lithium prices stopped falling in the previous round. Due to the scale of supply and flexible production and marketing strategies, Australian lithium mines had a significant impact on lithium supply, and the scale of production cuts in Australian mines in this round does not rule out the possibility of further expansion. CITIC Securities said that it is expected that lithium prices will be supported by around 80,000 yuan/ton. There is limited room for lithium prices to fall later. Combined with the “rush” effect of lithium stocks, the market's expectations that lithium stocks will stop falling and rebound are growing.
According to SMM research and analysis, lithium carbonate prices have soared sharply in the past three years, but the market demand growth rate began to slow sharply after entering 2023; at the same time, domestic lithium carbonate production capacity expansion rates were about 10%, 9%, 26%, and 45%, respectively, from 2020 to 2023, and production capacity was rapidly released under the guidance of huge production profits in the past three years; while the monthly operating rate of domestic lithium salt companies reached a high of 69% in June 2022, which also reflected the reality of short-term domestic lithium carbonate overcapacity.
Regarding future market expectations, according to SMM analysis, it is expected that supply and demand in the domestic lithium carbonate market will show a weak pattern around the Spring Festival. Taken together, downstream lithium battery companies are in a storage cycle, and with overall demand reduction around the Spring Festival, the market has no obvious procurement demand, making it difficult to support good performance in spot prices; however, market supply is also expected to decrease, and the price increase situation of lithium salt companies also limits the room for spot prices to decline. The overall spot price of lithium carbonate may remain weak and steady in the future.
According to Morgan Stanley's analysis, the average price of lithium carbonate in China reached 13,250 US dollars/ton (about 95,000 yuan/ton) in 2024, reaching a low in the second quarter. However, considering recent price trends and the extent of oversupply in 2024, there are further downside risks. Prices may fall to basic assumptions and pessimistic scenarios (8,000 US dollars/ton), and prices can only be expected to rise after seeing a further supply response.