UBS Sky Han and others recently released the research report “China's Lithium Prices Bottomed Out,” according to internal information, Ningde Era decided to suspend its lithium mica business in Jiangxi on September 10, causing the main lithium carbonate futures contract on the Canton Stock Exchange to skyrocket for a while.

In response, Goldman Sachs analysts Trina Chen and Joy Zhang said in a customer report on Thursday that production cuts in the Ningde era may bring a “short-term” bottom to lithium prices during years of bear markets, temporarily easing concerns about oversupply. However, they emphasized that the overall outlook for the lithium cycle is still very “negative.”

Analysts said:

“Although the scale of production cuts remains unclear, we estimate that assuming full production cuts, the global supply impact could be 3.9% in 2024 and 5.2% in 2025.”

They stated:

“At the same time, we expect oversupply in the global integrated lithium carbonate market to reach 26% in 2024 and 57% in 2025. Therefore, we believe that this production cut and several other recently announced cuts will not reverse the negative outlook for the balance of global supply and demand.”

“Our study of the global cost curve shows that the marginal cost of integrated lithium carbonate is still between $9,000 and $10,000 per ton, and may be further reduced as Chinese producers continue to cut costs in the first half of 2024. While production cuts can support prices in the short term, we are focusing more on cuts in development projects, which are critical to driving fundamental changes in supply and demand prospects. And the current spot price of $9,174 per ton may still not be enough to trigger a substantial reaction.”

The Goldman Sachs report also said that the oversupply situation has depressed prices.

Although Goldman Sachs doesn't think news from the Ningde era will reverse lithium prices from now on, UBS analyst Sky Han told customers on Wednesday that the latest developments in the Ningde era may mean that China's lithium prices have room to rise 11% to 23% for the rest of the year.

According to a previous Wall Street News article, UBS said that the suspension of lithium business in Jiangxi during the Ningde era will reduce China's monthly lithium carbonate production by 8%, which is equivalent to a monthly reduction of 5000-6,000 tons of lithium carbonate equivalent (LCE), which will benefit lithium prices in the long term against the backdrop of a balance between supply and demand in the market.

The report predicts that lithium prices are expected to have 11%-23% upward room during the year, and lithium prices will be supported at 8,600 US dollars/ton (approximately RMB 61,183 per ton).

According to UBS's analysis of the 2024 global cash cost curve, in the long run, lithium prices are expected to be supported at 9,909 US dollars/ton (about 70,496 yuan/ton) and peak at 10,968 US dollars/ton (approximately RMB 7,8030 per ton), because the Ningde era may resume its lithium business when lithium prices rise to this level.

According to the report's previous analysis, the cash cost of Ningde Era lithium business is approximately 10,968 US dollars (excluding tax) or 89,000 yuan (tax included) per ton. According to data from Shanghai Nonferrous Metals Network (SMM), the spot price of lithium carbonate has been below the cost line of the Ningde era since mid-July 2024. This means that the lithium business in the Ningde era has been losing money for two consecutive months.