On January 29th, Australian lithium miner IGO announced that its production of lithium concentrate from the world's largest lithium mine, Greenbush Mine, jointly owned by Tianqi Lithium and Yabao in the United States, will slightly decrease this year, to about 100000 tons. The long-term underwriting pricing model for the lithium concentrate produced by the mine has also been changed and will be reset on a monthly basis. Industry insiders say that this will significantly shorten the price transmission time between lithium mines and lithium salt processing.
Ping An Securities pointed out that in terms of raw material supply, the newly launched Australian Greenland mine Finniss in 2022 has stopped mining due to a significant drop in lithium prices. The world's largest salt lake Atacama has been blocked from mining due to local residents protesting and blocking salt channels. The disturbance of raw material supply has caused lithium prices to stabilize recently, and the reduction and shutdown of large-scale lithium resource projects may lead to a reassessment of the lithium supply and demand balance sheet. On the lithium salt supply side, small and medium-sized enterprises have reduced production due to losses, coupled with seasonal factors such as the Spring Festival and maintenance, and it is expected that the subsequent supply may continue to decline. In terms of demand, the production and sales of new energy vehicles remained high in December 2023, and battery factories continued to focus on destocking. The operating rate of positive electrode factories was low, and demand has not improved. However, the current lithium carbonate inventory of positive electrode material enterprises is at a low level, and there is limited room for further decline. Based on the sufficient pricing of lithium salts in the early stage and the long-term surplus, the marginal changes on the supply side may guide the expected adjustment before the fundamentals improve. In the future, it is necessary to continue to pay attention to the dynamics of high cost lithium resource production capacity. Under the dynamic adjustment of the balance sheet, the lithium price center may be re evaluated upwards. It is recommended to pay attention to the valuation and repair market of the lithium resource sector. The institution stated that the continuous decline in lithium prices is causing the middle and upper reaches to gradually clear out, and the short-term supply of lithium resources may be difficult to loosen. At present, the space below lithium is limited, and it is recommended to pay attention to highly integrated mining and metallurgical enterprises: Tianqi Lithium Industry and China National Mining Resources.
Galaxy Securities believes that the recent shutdown of some Australian lithium mines indicates that the current decline in lithium prices has begun to break through the cost lines of spodumene mining companies. If lithium prices continue to decline in the future, it is expected that more solid lithium mining enterprises will stop production or delay the progress of new production capacity, thereby providing bottom lithium price support for supply side contraction and completing industry bottoming and clearing. The worst time expected for the lithium sector in the A-share market has passed, and Tianqi Lithium, Xizang Mining, Sinomine Resources, etc., which are optimistic about the high self-sufficiency rate of lithium, are optimistic.