Facing multiple changes, can lithium prices still "soar" all the way in 2023?
Recently, a number of lithium mine suppliers released 2022 financial report performance forecast, from the overall situation, the lithium mining industry in the past year can be described as a lot of money: Tianqi Lithium expects that the net profit in 2022 will be about 23.1 billion ~ 25.6 billion yuan, Year-on-year increase of 1011.19% ~ 1131.45%; Ganfeng Lithium released a performance forecast said that it is expected to make a profit of 18 billion ~ 22 billion yuan in 2022, a year-on-year increase of 244.27% ~ 320.78%; Salt Lake shares said that it is expected that the net profit attributable to shareholders of listed companies last year will be 15 billion ~ 15.6 billion yuan, an increase of 234.94% ~ 248.33% over the same period of the previous year; Tianhua Chaojing is expected to achieve a net profit of 6.4 billion ~ 6.8 billion yuan in 2022, a year-on-year increase of 602.76% ~ 646.68%.
In this regard, a number of lithium mining companies explained that this is mainly due to the rapid development of the new energy vehicle industry, which has driven the growth of demand for lithium salt in the whole industry, thereby driving the company's performance in 2022. However, with the frequent decline in lithium carbonate prices from the end of last year, coupled with the slowdown in the growth of the new energy vehicle industry this year, the ultra-high-speed growth of the lithium mining industry may be difficult to continue. CITIC Securities Research Report said that the inflection point of lithium prices or in 2023 may come, the price may fall from the high, and in 2024, as the pressure of oversupply increases, lithium prices will decline significantly.
"Lithium mine rings, gold ten thousand taels"
According to Wind data statistics, as of February 8, a total of 129 companies related to Wande lithium mine and power battery announced performance forecasts, and 83 companies were expected to be happy (pre-increase, slight increase, continued profit, and turnaround), accounting for more than 60%. Among them, the net profit ceiling of 4 companies, including Tianqi Lithium, Ganfeng Lithium, BYD and Salt Lake Shares, exceeded 10 billion yuan. From the perspective of growth, the performance of 53 companies doubled, and the net profit of 3 companies, including Rongjie Co., Ltd., Jixiang Co., Ltd., and Tianqi Lithium Co., Ltd., increased by more than 10 times.
For the reasons for the substantial increase in performance, Tianqi Lithium said that this is mainly due to the improvement of the global new energy vehicle boom, lithium-ion battery manufacturers accelerating capacity expansion, downstream cathode material orders and other positive factors, the sales volume and average sales price of the company's main lithium products in 2022 increased significantly compared with 2021. Ganfeng Lithium also believes that in 2022, the demand for lithium salt from downstream customers will grow strongly, and the sales price of lithium salt products will increase significantly compared with the same period of the previous year.
The performance of lithium mining companies "soared" directly due to the rise in lithium prices. According to SMM analysis, in addition to the temporary pause button on lithium carbonate prices due to the impact of the epidemic on downstream demand in April last year, the overall lithium salt price in 2022 continued to rise due to terminal power, energy storage demand and downstream capacity expansion, and rushed to a historical high of 567,500 yuan / ton on November 9. Subsequently, in the context of weak downstream demand, lithium carbonate spot quotations ushered in a slight correction at the end of the year, but they were still at a relatively high level. According to data disclosed by Everbright Securities, the average prices of battery-grade lithium carbonate in the four quarters of 2022 were 400,000 yuan/ton, 471,700 yuan/ton, 479,900 yuan/ton and 547,200 yuan/ton, respectively. From the perspective of the whole year, the cumulative increase in domestic battery-grade lithium carbonate prices in 2022 will be about 84%. It is no wonder that industry insiders jokingly call "lithium mine ringing, gold 10,000 vehicles".
The fundamental reason for the crazy rise in lithium prices is the rapid expansion of the new energy vehicle industry, caused by the imbalance between supply and demand. According to the analysis, in the first quarter of 2022, affected by the stimulation of European and American policies, the rapid growth of the terminal market and the accelerated expansion of production in the midstream of the industrial chain, the spot price of nonferrous lithium carbonate (99%) in Shanghai rose rapidly from 275,000 yuan / ton to 503,000 yuan / ton. In the second quarter of 2022, due to multiple factors, sales of new energy vehicles decreased significantly. In the second half of 2022, as the sales of new energy vehicles continued to maintain high growth, stimulated by policies such as China's extension of the purchase tax exemption policy for new energy vehicles, the implementation of the Inflation Reduction Act in the United States, and the adoption of the 2035 ban on the sale of fuel vehicles by the European Parliament, lithium prices rose again steadily, and under the hype of Australia's lithium concentrate auction, it hit a sky-high price of 567,500 yuan / ton in November 2022.
Supply and demand structure may improve this year
Will the phenomenon of "eating meat upstream and drinking soup downstream" continue this year?
SMM lithium analyst Xu Ying said that with the later mine volume, the supply and demand relationship of lithium salt may turn into oversupply, but the cost of lithium mine will still form a certain support for lithium salt prices. With the expected excess supply of raw materials and the downward price of cost-side prices, it will further affect the price trend of lithium salt, and the supply and demand structure of lithium salt may be improved.
With the continuous expansion of the new energy vehicle market base, the industry generally believes that the growth rate of the global and Chinese new energy vehicle market will slow down this year. Bloomberg predicts that global new energy vehicle sales will reach 13.6 million units in 2023, a year-on-year increase of about 35%, which is significantly lower than the growth rate of up to 55% in 2022. According to the forecast of the China Association of Automobile Manufacturers (hereinafter referred to as "CAAM"), domestic new energy vehicle sales may exceed 9 million this year, a year-on-year increase of about 32%. Even from the absolute value of market increase, the overall sales of domestic new energy vehicles in 2023 will only increase by about 1 million ~ 1.5 million units compared with last year, which is halved compared with the absolute increase in the market in 2022 (more than 3 million units).
Industry insiders said frankly that China will still be the world's largest new energy vehicle market, but with the formal withdrawal of state subsidies, policy support will weaken, or will reduce consumer demand to a certain extent. This sign was already visible at the beginning of the year. According to statistics, the total retail sales of the passenger car market in January 2023 was 1.293 million units, down 37.9% year-on-year and 40.4% month-on-month. Among them, wholesale sales of new energy passenger vehicles were 389,000 units, down 7.3% y/y and 48.2% m/m. The slowdown in NEV sales in December continued, with retail sales of NEVs reaching 332,000 units in January, down 6.3% y/y and 48.3% m/m. "At the beginning of the new year, the market has entered a transitional phase where consumers are waiting for policy." Cui Dongshu, secretary-general of the National Passenger Vehicle Market Information Association, said that after the withdrawal of national subsidies for new energy vehicles, the national new energy passenger vehicle market quickly entered the freezing point as scheduled in January, and will gradually recover. According to a source from a power battery company, since mid-December last year, some automakers have stopped placing orders upstream, on the one hand, they feel that the car cannot be sold; On the other hand, after the withdrawal of subsidies, the market trend this year is still unclear, and new pricing strategies are still brewing, and before that, the landing of upstream orders will be suspended.
In addition to the Chinese market, Europe, the world's second largest market for new energy vehicles, also has great uncertainty. Although the European market has gradually come out of the haze since the fourth quarter of 2022, the overall growth prospects are promising, but geopolitical conflicts are still continuing, and Germany's new energy subsidies will decline to 1500~2000 euros / vehicle in 2023, which may have a certain impact. In addition, global protectionism has risen, which may lead to the disruption of the industrial chain and supply chain, inhibiting the growth of new energy vehicle production and sales. In particular, the US "Inflation Reduction Act" intends to exclude Chinese battery companies and material companies from its automotive power battery industry chain through differentiated subsidy policies, which will also affect other countries, thereby affecting the global demand for lithium mines.
The chain reaction after Tesla's price cut
At the beginning of 2023, Tesla has played an unprecedented "price reduction card": the starting price of Model 3 is reduced by 36,000 yuan, the starting price of Model Y is directly reduced by 29,000 yuan, and the price reduction of the remaining versions of the two models ranges from 20,000 ~ 48,000 yuan, setting a record low for Tesla's price in China. This immediately triggered more fierce price competition in the new energy vehicle industry, and before the Spring Festival holiday, Qianjie and Xpeng Motors quickly followed suit, reducing the price of their products by nearly 30,000 yuan; After the beginning of the year, more car companies began to "fancy" price reductions, GAC AION launched a time-limited delivery incentive of 5,000 yuan per vehicle, as well as 3-year 0 interest, low down payment time-limited financial subsidies, etc.; Wuling Motors announced that before March 31, the starting price of Hongguang MINIEV will be reduced by 3,000 yuan to 29,800 yuan; the price of SAIC Feifan R7 vehicle electric separation version model will be reduced to 195,900 yuan, a decrease of about 20,000 yuan; Geely's Emgrand brand has also reduced the price of some new energy models, with a reduction of 13,000 yuan; even NIO, which advertises that it will never reduce the price, has also made price adjustments in the way of "clearing inventory", and it is reported that "NIO began to carry out price reduction promotions for the 2022 ES6 and ES8." The price drop was up to more than 100,000 yuan." Other car companies have adopted a variety of preferential measures such as financial subsidies, deposit inflation, limited-time free exterior options, optional discounts, insurance subsidies, and delivery incentives, etc., to reduce prices in disguise.
The direct impact of the "price war" on the market should be the increase in sales, but unfortunately, in addition to Tesla, "Wei Xiaoli" and GAC Aion and other January sales have declined to varying degrees, even the domestic new energy vehicle boss - BYD's year-on-year growth rate in the month has also decreased compared with the same period last year.
In the absence of rapid growth in market demand in the short term, under the "price war", cost control has naturally become an urgent concern for car companies. Among them, the power battery, which accounts for 60% of the cost of the whole vehicle, bears the brunt. Industry experts believe that after last year's forced price increase, new energy vehicle companies have made some adjustments to the supply chain, such as increasing the number of suppliers, which has increased the voice of vehicle companies in the industrial chain and promoted battery manufacturers to reduce prices. As a result, in order to ensure their own profits, battery manufacturers are likely to further transmit the pressure of cost reduction to the upstream raw material supply link, and under the game between the two parties, even if the price of lithium will not fall rapidly, the possibility of price increases is greatly reduced.
The industrialization of sodium-ion batteries has accelerated
In order to reduce the cost of power batteries, finding a new technical route with stable raw material resources and low cost has become another option, and the industrialization process of sodium-ion batteries is expected to accelerate this year, thereby replacing part of the market share of lithium-ion batteries.
Securities institutions pointed out that due to the high price of lithium, more and more car companies have included sodium-ion batteries in the key areas of research and development. According to reports, compared with lithium batteries, sodium batteries have abundant resources and low cost, good low temperature, rate and safety, production links can be communicated with lithium batteries and other advantages, practical pain points are low energy density, generally between 80~170Wh/kg, and poor cycle performance. According to estimates, the current material cost of sodium batteries is about 0.427 yuan / Wh, of which the cost of positive electrode, negative electrode and electrolyte accounts for 30%, 21% and 23% respectively, and the estimated results show that the material cost after the industrialization of sodium electricity will be 35% lower than that of the lithium iron phosphate battery cell at that time.
Public information shows that CATL, EVE lithium energy and other head power battery companies have begun to layout sodium-ion battery business, as of January 2023, the national sodium-ion battery has a planned production capacity of 48GWh, from the perspective of the scale of construction, CATL is the largest, the expected shipment is 2Gwh, Zhongke Haina 1Gwh; In the second half of the year, Chuanyi will also have 1Gwh, with a planned production capacity of 9Gwh; Hanhang Technology expects 0.5Gwh. At the same time, car companies are also trying to install sodium-ion batteries, and it has been reported that Funeng Technology officially announced that it received a notice from Jiangling Group New Energy "agreed to carry out pre-research work on the pre-adaptability of sodium-ion batteries for EV3 models", and models with sodium-ion batteries will be put on sale in 2023.
Soochow Securities said that it is expected that 2023 will be the first year of industrialization of sodium-ion batteries, which can achieve small-batch shipments and large-scale mass production in 2024, and the scale is expected to reach 30GWh; Zheshang Securities believes that it is expected that the total demand for sodium-ion batteries can reach 88GWh in 2025 and 378GWh in 2030. "The theoretical cost of sodium-ion batteries is low, the gap between energy density and cycle life and lithium batteries is gradually narrowing, and its high rate, low temperature resistance and safer characteristics have unique advantages over lithium batteries, and are expected to initially form industrialization this year." Securities institutions believe that this will divide the market share of lithium-ion batteries to a certain extent, resulting in a further decline in market demand for lithium mines.
In particular, as the seventh most abundant element on Earth, sodium has 420 times more reserves in the earth's crust than lithium, and is evenly distributed around the world, so there is no need to worry about shortages.
Short-term increments are limited
In terms of the supply of lithium mines, although stimulated by high lithium prices, the development of global lithium resources will accelerate significantly in 2022, but due to many factors such as long construction and production cycle, environmental protection policies and natural conditions, insufficient production factors, and the rise of resource protectionism, the increase rate of lithium supply is still relatively slow, and the imbalance between supply and demand has significantly intensified. However, this problem is expected to ease in 2023, and many institutions point out that the global supply of lithium resources is expected to increase significantly in 2023.
It is reported that under the stimulation of industry profits, lithium resources and lithium salt plants have expanded rapidly. On the one hand, a number of overseas lithium resource projects are expected to be put into operation in 2023 after continuous construction and expansion, including not only traditional Australian mines and large salt lakes in South America, but also the acceleration of the development of lithium mine projects in Africa. On the other hand, the domestic lithium resource industry policy is relaxed, a large number of lithium mica ore, salt lake brine, etc. are expected to accelerate into the market, China's Jiangxi mica, Sichuan spodumene, Qinghai salt lake will also have 68,000 tons of new production released.
According to data calculated by Fubao Lithium Power Grid, in 2023, the global lithium resource side is expected to release 352,000 tons of new production. Among them, 60% of Australia's lithium resource projects will have new production released in 2023, and the annual increase of the seven major spodumene projects is expected to reach 115,000 tons. Overall, it is expected that the global lithium resource production will exceed 1 million tons in 2023, a year-on-year increase of about 40%. Especially in the second and third quarters of this year, the supply and demand situation of the lithium market is expected to reverse and begin to loosen.
CITIC Securities Research Report is expected to be close to it, believing that the global new lithium supply will reach 400,000 tons in 2023, and in 2023~2025, the proportion of global lithium oversupply to total demand will be 6%, 23% and 30%, showing a trend of increasing year by year. In 2023, due to the small proportion of surplus, lithium prices are expected to remain above 300,000 yuan / ton. In 2024, the supply is expected to be significantly excessive, and lithium prices are expected to fall significantly, and the price may fall below 150,000 yuan / ton.
However, because the supply release is not synchronized, some experts believe that there may still be a gap in the supply of lithium mines this year. "We have noticed that due to labor shortages, power restrictions and other factors, there are currently some lithium mines that have been delayed in supply, such as mines in Australia and Africa, and the increase is limited in the short term." Jiang Yan said.
The downward price is a foregone conclusion
According to data released by Shanghai Steel Union, the quotation of lithium battery materials continued to decline on February 7, and the average price of battery-grade lithium carbonate fell by 1,000 yuan / ton to 462,500 yuan / ton. Compared with the historical average price of 590,000 yuan / ton in mid-November last year, this quotation has fallen by 127,500 yuan / ton, a decrease of more than 20%. In fact, this round of lithium carbonate price downward trend as early as before the New Year's Day this year, from December last year, lithium carbonate prices have been declining for two consecutive months, especially on January 9, the price of battery-grade lithium carbonate fell below the 500,000 yuan / ton mark, hitting a new low in more than 4 months.
So, what is the trend of lithium prices in 2023?
Supply and demand remain the main determinants. Some institutions have calculated the total supply and demand of lithium resources in the four quarters of 2023. On the supply side, by collecting, sorting out and comparing the volume of 44 major lithium resource projects around the world, it is expected that the increments in the four quarters of 2023 will be 57,000, 66,000, 100,000 and 129,000 tons, respectively; on the demand side, the demand increment of the three major tracks of power batteries, energy storage and small batteries will be 57,000, 63,000, 73,000 and 82,000 tons respectively from the first quarter to the fourth quarter of 2023, and the total demand increase for the whole year will be 276,000 tons. The comparison shows that the supply and demand in each quarter are -01,000, 04,000, 26,000 and 47,000 tons, respectively, and the marginal oversupply will appear in the second half of 2023.
Wang Pingwei, chairman of China Mining Resources Group, said in an interview with the media that the gradual decline in lithium prices will continue as more supply emerges to cut the abnormally high profit margins of lithium producers. He expects lithium prices to fall by about a quarter from current levels, but prices won't plummet as the market remains tight. In 2023, the price of lithium carbonate will fall to about 400,000 yuan per tonne, and at the same time, he believes that even at a lower price level, China Mining will still have a good profit margin. "Overall, the downward trend of lithium carbonate prices in 2023 is the general trend, but it is unlikely to return to the level of tens of thousands of yuan and hundreds of thousands of yuan in the past 1 ton, and the probability will hover around at 300,000~400,000 yuan / ton." Yu Qingjiao, secretary general of the Zhongguancun New Battery Technology Innovation Alliance and chairman of the Battery 100 People Association, told reporters.
Originally published in China Automotive News, February 14, 2023