The Zhitong Finance App learned that Huafu Securities released a research report saying that the overall capital expenditure for overseas lithium projects decreased in Q4 in '23. It is expected that long-term supply will be lower than expected, but the impact on currently important projects in production and under construction is small, and short-term supply increases are highly certain. In the short term, due to the impact of the off-season demand, it is expected that the month-on-month growth rate of demand may be lower than the supply growth rate. Lithium carbonate stocks will still be abundant, and lithium prices will move downward as the Australian mine cost curve moves downward and pricing methods change; in the medium to long term, lithium prices have already fallen for one year, and the profiteering phase has been completed. 24 has ushered in production capacity, and 25 years have ushered in inventory. Currently, lithium prices are close to the balance between supply and demand.
Individual stocks focus: Tianqi Lithium (002466.SZ), Salt Lake (000792.SZ), Zangge Mining (000408.SZ), Ganfeng Lithium (002460.SZ), Yongxing Materials (002756.SZ), others focus on Jiangte Electric (002176.SZ), etc.
Huafu Securities's views are as follows:
Lithium concentrate production: The Australian mine continues to grow mainly in production mines.
1) Australia: In 2023Q4, Australia had 8 production projects. SC6 concentrate production was 849,000 tons, +27%/+6% year-on-year. The main reason for the increase was the steady decline in production capacity of Marion, PLS, Wodigna, and Bald Hill (resumed production). However, due to high mineral prices, shareholders reduced their intake of goods to prevent cumulative production cuts. Referring to the FY24 (23H2-24H1) production guidelines, all eight major projects in Australia have increased, with the exception of Greenbush. 2) Africa: The African project is mainly an integration project for Chinese enterprises. The ore was gradually shipped back to China in the fourth quarter and began contributing to the increase at the end of 2023. 3) Europe and America: Production expansion in South American projects is relatively stable. The North American NAL project is being tested due to higher prices and hematopoietic capacity. European and some North American planned and ongoing projects have high development risks due to environmental protection and approval issues, and progress is likely to fall short of expectations.
Lithium concentrate sales: Sales continued to pick up in Q4 due to changes in the underwriting formula.
Currently, with the exception of Greenbushes being M-1, the underwriting formula for most mines has changed to M+1 or M+2. The reverse pressure on the smelter is reduced, leading to a month-on-month increase in Australian mine sales. The actual sales volume of SC6 lithium concentrate was 767,000 tons, +7.5%/+3.0% year over month; the African project is mainly an integrated lithium project for Chinese companies, and there are no barriers to sales within the company; sales and delivery of the new production capacity of American lithium mines began in Q3, due to the signing of underwriting agreements or active cooperation in price adjustments.
Lithium concentrate price: Due to the concentration of sales at the end of the year and changes in the pricing formula, the price of Australian ore dropped sharply in Q4.
As the pricing formula changed, as the price of lithium salt fell and made up for the decline, the price adjustment range was 19%-71% month-on-month. Among them, Thalison concentrate FOB sold for $3016, -19% month-on-month; Cattlin concentrate sold for $763 ($850 for SC6), -71% month-on-month; PLS (CIF China) concentrate sold for $1,280, -50% month-on-month; Marion concentrate sold for $763 (equivalent to SC6 was $1,060), -61% month-on-month; Hill and Bald sold for 91% month-on-month It is on sale at a provisional price of $79.
Lithium concentrate cost: Due to the reduction in unit cost of production capacity climbing, the overall cost curve for Australian mining has declined.
Capacity utilization has an important impact on costs. As production and sales of Marion, Pilbara, and Wodgina increase, the cost of major Australian mines declined month-on-month, and many companies predict that unit costs will decrease further as capacity utilization increases; however, Greenbush Mine began to cut production due to reduced shareholder intake, and the FY24 cost guidelines have increased this quarter and FY24 cost guidelines. With the exception of Thalison, FOB costs (excluding royalties) of SC6 concentrate from major Australian mines remained in the range of $450-633 this quarter, and there is still some profit margin compared to current mineral prices.
Risk warning: Demand for electric vehicles continues to fall short of expectations; the commissioning progress of lithium resource projects exceeds expectations; mine clearance falls short of expectations.