The growth rate of global lithium ore supply may open a downward channel. Under the support of costs, lithium prices are bottoming out at an accelerated pace, and it is recommended to gradually lay out lithium ore stocks.
The Zhitong Finance App learned that Huaxin Securities released a research report saying that the global lithium resource supply for 2023-2025 is predicted to be 110.78, 147.34, and 1.945,400 tons of LCE, respectively. The demand is 109.86, 144.65, and 1.8563 million tons of LCE, respectively. The oversupply is 0.92, 2.69, and 891,000 tons of LCE, respectively. Australia's first lithium mine to be cut and discontinued appeared, and operating profits were greatly adversely affected. The bank believes that for global lithium supply, sluggish lithium prices will slow down the speed at which new mines are to be put into operation, and will also impact relatively expensive production mines. The growth rate of global lithium ore supply may open a downward channel. Under the support of costs, lithium prices are bottoming out at an accelerated pace, and it is recommended to gradually lay out lithium ore stocks.
The views of Huaxin Securities are as follows:
Cost support is prominent, and lithium prices are close to the bottom range
The bank predicts that in 2023-2025, the global supply of lithium resources will be 110.78, 147.34, and 1.945,400 tons of LCE, respectively, with demand of 109.86, 144.65, and 18.563 million tons of LCE, respectively, and oversupply of 0.92, 2.69, and 891,000 tons of LCE, respectively. The current price of lithium salt is close to the cost line of some mines. With the advent of the first Australian mine to reduce production, the cost may support the price, and lithium prices have bottomed out.
Australian lithium mine: Finniss suspends mining, showing the first reduction in production
Finniss was put into operation in Q1 2023, but a temporary cessation of mining was announced on January 5, 2024, and early work on BP33 was suspended. According to IGO's company announcement on January 29, 2024, the Greenbushes project's production guidelines for fiscal year 2024 were lowered from the previous 140-1.5 million tons to 1.30-1.4 million tons.
LionTown announced on January 22, 2024 that it will begin reviewing the planned expansion of the KathleenValley project and related capacity increases. The production capacity design of the 3 million tons/year plant currently under construction remains unchanged, so the second phase of the project may be postponed.
Wodgina and Mt Cattlin maintained steady operations, and Bald Hill successfully resumed production. The production of Pilgangoora and Mt Marion in Q4 in 2023 increased by 22.05% and 29.69%, respectively, and the expansion project progressed according to plan.
South America and other salt lakes: significant cost advantage, production growth is slowing
South America is rich in lithium resources, particularly concentrated in the South American “lithium triangle” and has many projects under production and construction. Production projects include Atacama, Olaroz, Hombre Muerto, Cauchari-Olaroz, SDLA, Rincon, etc. Since the cost of salt lakes in South America has a clear advantage over spodumene and spodumene, there is less risk of production reduction due to low lithium carbonate prices.
Among the projects under construction, Zijin Mining's 3Q project, Eramet's Centenario project, and Ganfeng Lithium's Mariana project are expected to be put into operation in 2024, and the HMW, Great Salt Lake, and Zero Carbon Lithium projects are scheduled to be put into operation in 2025. Projects under construction have limited production capacity, so production growth in South America and other salt lakes is expected to slow.
Other overseas lithium mines: production capacity is expanding rapidly in Africa
Lithium projects in Africa are mainly concentrated in countries such as Zimbabwe, Mali, Ghana, and the Democratic Republic of the Congo (DRC). The main projects in production are Bikita, Arcadia, SabiStar, and Kamativi, and the main projects under construction include Zulu, Goulamina, Ewoyaa, Bougouni, etc. In addition, Zijin Mining was invited to lead the exploration and development of the world-class lithium mine in northeastern Manono. It is currently completing geological survey and research preparation work. After the project is implemented, it is expected that project construction will be completed within 2 years after the research possibilities and financing plans are determined.
Lithium projects in production in the US include Canada's TanCo and Nal, Brazil's Grotado Cirilo and Mibra, and the main projects under construction in the US include James Bay, Nemaska, and Carolina. Among them, the first phase of Sigma's Grota do Cirilo project has already produced 270,000 tons of lithium concentrate per year (off 36,700 tons of LCE), and the long-term production capacity plan is to produce 766,000 tons of lithium concentrate per year (104,000 tons of LCE).
Domestic: Focus on expanding production of lepidomite and salt lakes, but the increase is limited
Domestic spodumene projects mainly include Methyl Card, Yelonggou, and Lijiagou. Production capacity is small, and there has been almost no increase for the time being. Lepidolite projects include Huashan Porcelain Stone Mica, Yichun Porcelain Stone Mine, Yichun Lepidolite, and Xiangyuan Hard Rock Lithium Mine.
In terms of salt lakes, there are many lithium salt lake projects in China. Among them, Charhan Salt Lake, Mamicuo Salt Lake, Zabuye Salt Lake, and Lagocuo Salt Lake all have plans to expand production, and the resulting increase is worth paying attention to. However, the increase in domestic salt lake projects is limited, making it difficult to have a big impact on the global lithium carbonate supply and demand pattern.
Investment Strategy:
The prices of lithium salt and lithium ore have experienced a sharp drop. Australia's first lithium mine to cut production has appeared, and operating profits may have been greatly adversely affected. The bank believes that as far as global lithium supply is concerned, sluggish lithium prices will slow down the pace of new mines to be put into operation, and will impact relatively expensive mines in production. The growth rate of global lithium ore supply may open a downward channel. Under the support of costs, lithium prices are bottoming out at an accelerated pace, and it is recommended to gradually lay out lithium ore stocks. Maintain the lithium industry's “recommended” investment rating.
Key recommendations:
Recommended China Mining Resources (002738.SZ): Lithium ore lithium salt production capacity is growing rapidly. Cangge Mining (000408.SZ): Simultaneous development of multiple resources of lithium salt, potash fertilizer and copper ore. Shengxin Lithium Energy (002240.SZ): Production capacity is increasing steadily, and we are looking forward to increasing the volume of resources. Tianqi Lithium (002466.SZ): High-quality card position resources, vertical integration of global industrial chain advantages. Rongjie Co., Ltd. (002192.SZ): Owns methyl card spodumene ore, and future increases can be expected. Salt Lake Co., Ltd. (000792.SZ): Independently develops lithium adsorption technology to promote enterprise growth with potash fertilizer and lithium salt.
Risk warning: 1) Demand for electricity falls short of expectations; 2) overseas salt lake and lithium mine production progress exceeds expectations; 3) demand for energy storage falls short of expectations; 4) domestic lithium mica and salt lake production progress exceeds expectations; 5) geopolitical conflicts and cargo transportation risks; 6) new technologies such as sodium batteries are replacing lithium battery demand, etc.