The Zhitong Finance App learned that Guolian Securities released a research report saying that the oversupply of lithium resources will increase in 2024-2025, and the bank expects the global excess supply of lithium resources to be 15.8/247,000 tons LCE. Some of the lepidomite and African spodumene projects at marginal cost may face the possibility of liquidation. The Core Lithium announcement at the beginning of '24 to temporarily shut down the Finniss Mine Grants mining plant, and the IGO announcement that the GreenbushesFY24 lithium concentrate production guidelines will be lowered by 100,000 tons all reflect signs that the supply side is gradually clearing up. Combined with the latest supply-demand balance sheet and production cost curve, the bank expects lithium prices to bottom out at 70,000 to 80,000 yuan.

The views of Guolian Securities are as follows:

Supply side releases volume as scheduled

According to USGS, global lithium production in 2023 (excluding the US) was 185,000 metal tons, up 26.5% year on year; of these, Australia/Chile/China/Argentina lithium production was 8.6/4.4/3.3/0.96 million metal tons respectively, accounting for a total of 93.5%. The bank estimates the global supply of lithium resources from 2024-2025 to be 138.2/1.766 million tons of LCE. In 24 years, 329,000 tons of LCE were added. Among them, South American salt lakes, African lithium mines, and Western Australian lithium mines are expected to contribute 12.6/9.0/30,000 tons of LCE, while China's lithium mica is expected to contribute 37,000 tons of LCE.

Steady growth on the demand side

Benefiting from the increase in the penetration rate of new energy vehicles and the development of lithium batteries for energy storage, global lithium battery shipments have maintained rapid growth, and the share of lithium demand in the battery sector has further increased. According to USGS, lithium batteries accounted for 87% of global downstream lithium applications in '23, an increase of 7 pcts over the previous year. The bank estimates the global demand for lithium resources in 2024-2025 of 122.4/1,519,000 tons of LCE, of which the battery sector's demand for lithium resources is 94.4/1.04 million tons of LCE, respectively.

Lithium prices have entered a downward cycle

In 2023, due to factors such as inventory removal from the downstream industrial chain, the growth rate of terminal demand slowed down, and the price of lithium salt products dropped sharply. As of 2024/3/1, the average spot price of domestic battery grade/industrial grade lithium carbonate was 10.25/94,500 yuan/ton, down 73.06%/72.21% year on year; the average spot price of battery grade/industrial grade lithium hydroxide was 8.88/8100,000 yuan/ton respectively, down 79.18%/79.49% year on year.

The price of lithium may bottom out at 70,000 to 80,000 yuan

The oversupply of lithium resources increased from 2024-2025, and the bank expects the global excess supply of lithium resources to be 15.8/247,000 tons of LCE. Some of the lepidomite and African spodumene projects at marginal cost may face the possibility of liquidation. The Core Lithium announcement at the beginning of '24 to temporarily shut down the Finniss Mine Grants mining plant, and the IGO announcement that the GreenbushesFY24 lithium concentrate production guidelines will be lowered by 100,000 tons all reflect signs that the supply side is gradually clearing up. Combined with the latest supply-demand balance sheet and production cost curve, the bank expects lithium prices to bottom out at 70,000 to 80,000 yuan.

Investment advice:

Based on downstream demand for lithium having high growth characteristics that distinguish it from traditional non-ferrous varieties, there may still be opportunities for a rebound due to phased supply and demand mismatches during the downward cycle. The bank suggests focusing on companies with strong certainty in production growth, high resource self-sufficiency rates, and cost advantages over the next 3 years, and recommending global lithium giant Tianqi Lithium (002466.SZ), Yongxing Materials (002756.SZ), a pioneer in lithium mining in Africa (002738.SZ).

Risk warning: the increase in NEV penetration rate falls short of expectations; environmental protection and production safety risks; risk of exchange rate fluctuations; geopolitical and anti-globalization risks.