Supply and demand trends of lithium salt resources in 2022

Lithium ore high price auction

With the increasing application of lithium-ion batteries, the demand for lithium resources is also increasing, and most lithium-ion batteries are used to form battery packs. You can see the production process of 12 volt lithium battery.

On May 16, Chengdu Xingneng auctioned its 54.2857% stake in Snowway Mining in bankruptcy and liquidation. The starting price was RMB 3,352,900, which attracted 21 companies to bid 3,448 times. The price of 2 billion RMB was sold, which means that the auction value has doubled by 597 times.

Snowway, behind it, owns the prospecting right of a super-large lithium mine, the Dechalongba Lithium Mine. The mine is located in the Mika spodumene mining area in the northeastern part of Yajiang County, Ganzi Prefecture, Sichuan, with a resource reserve of 24.92 million tons and a lithium oxide resource of 293,200 tons (about 725,100 tons of LCE), with an average grade of 1.18%.

According to industry estimates, based on the auction price of 2 billion RMB, the purchase price of a single ton of LCE in this transaction is about 5080 RMB. Taking into account the transaction commission of 60 million RMB and the debt of 870 million RMB corresponding to 54.3% of the equity, the actual auction cost reached 2.93 billion RMB.

Based on this, the purchase price of a single ton of LCE is calculated to be about 7443 RMB, which is a new high for the consideration of the lithium ore transaction target.

Not long ago, Australian lithium miner Pilbara (Pilbara) held its first lithium concentrate auction in 2022 on April 27. The auction price was 5,650 US dollars/ton, and the auction totaled 5,000 tons. According to estimates, combined with the freight of 90 US dollars / ton, the equivalent cost of lithium carbonate is about 380,000 RMB / ton.

Lithium resources are booming

The price of lithium salt is rising, and the competition for lithium resources is unprecedentedly fierce. In particular, due to the increasingly complex mining development environment in other countries and the influence of factors such as the epidemic, the value of China’s local lithium resources is highlighted, and the purchase price of related assets continues to increase.

The overall situation facing this year is: the global demand for new energy vehicles has been boosted by a high degree of prosperity, the complexity and progress of the development of global lithium resource projects are less than expected, and the supply and demand of lithium resources is seriously imbalanced.

In addition, some companies are hoarding goods, and the price of lithium salt in China is rising, which brings huge cost pressure to battery companies and supply chains. Battery companies collectively announced to increase product prices.

Since 2021, the price of battery-grade lithium carbonate has jumped up from 55,000 RMB/ton at the beginning of 2021 to 266,000 RMB/ton at the end of the year, an annual increase of more than 4 times. In March 2022, it will break through the 500,000 RMB/ton mark, a surge of 809% compared to the beginning of last year. There was a slight correction in April, but it still remained at a high level of 450,000 RMB/ton.

Facing the TWh era, the strategic importance of lithium resources has become a global consensus, and the competition is bound to become more intense in the future. If relying on existing lithium production projects under construction, there will be a demand gap of nearly 50% in the world by 2030.

In order to maintain the security of supply of lithium resources, Chinese enterprises have significantly increased their efforts and speed in the development of lithium resources. In the context of the importance of resources, in addition to the high-grade salt lake minerals in other countries, the development of lithium resources in China has also received increasing attention, which is of great strategic significance for ensuring the security of lithium resource supply.

Chinese lithium resource development accelerates

As the world’s largest demander of lithium salt, China’s proven lithium resources are only 6% of the world’s, and they are concentrated in salt lake lithium, which is difficult to extract. China’s lithium production capacity is limited, and the proportion of imports still exceeds 70%.

Specifically, more than 80% of China’s lithium resources exist in salt lakes, distributed in Qinghai, Tibet and other provinces, while ore resources are concentrated in Sichuan, Jiangxi, Hunan, Xinjiang and other provinces.

Among them, lepidolite mines are concentrated in Yichun, Jiangxi, and spodumene mines are mainly distributed in Sichuan, accounting for more than 50% of the national lithium mines.

The rapid rise in the price of lithium salt, combined with the help of the market, technology and policies, has accelerated the development of lithium resources in China. There are 10 projects involved in the first quarter of 2022. The development types involve lithium extraction from salt lakes, mica lithium extraction and spodumene extraction. The participating entities include power battery companies and lithium salt companies.

However, battery companies including Top10 lithium ion battery manufacturers in China and other battery companies ended up participating in the development of China’s lithium resources through investment, capital increase, acquisition, technical cooperation, etc., to help accelerate the industrialization of China’s lithium resources.

After CATL invested in North American lithium industry, Canadian mining company Neo Lithium, Australian mining company Pilbara Minerals and other companies to deploy overseas lithium mines;

At the same time, it also established lithium mining companies in Jiangxi, Sichuan and Guizhou to develop domestic lithium resources, and signed long supply orders with lithium salt suppliers to ensure the stable supply of lithium resources.

In April 2022, Yichun Times, a subsidiary of CATL Holdings, successfully bid for the exploration right of ceramic soil (including lithium) in the Zhenkouli-Fengxin County Jianxiawo Mining Area, Yifeng County, Jiangxi Province with an offer of RMB 865 million; in October 2021, CATL also cooperated with Sichuan Energy Investment, which indirectly holds the mining rights of the Lijiagou spodumene mine in Jinchuan County, Sichuan.

Guoxuan Hi-Tech has deployed lithium carbonate and lithium ore mining and selection projects in Yichun through self-built production capacity, and has locked up upstream lithium resources through strategic cooperation or long-term orders with Yanhu Co., Ltd. and Jiangte Electric.

On May 20, Yichun Guoxuan Mining won the general survey and exploration right of the porcelain clay (lithium-containing) mine in the Shuinan mining section of the Kuishili mining area in Yifeng County, Jiangxi Province at a price of 460 million RMB.

CALB and Tianqi Lithium have strategically cooperated in the fields of resource development, lithium salt processing, new material development, battery module production, battery cell production, resource recycling, ESG projects and other fields to carry out joint investment, cooperative R&D and other cooperation.

SVOLT and BASF Shanshan have made a strategic investment in Yongshan Lithium, and the three parties will also reach strategic cooperation in industrial capital, lithium salt product supply, and lithium ore resources.

In addition, EVE acquired lithium mining companies such as Jinkunlun and Jinhai Lithium, and joined hands with Lanxiao Technology to participate in the development and utilization of lithium resources in Jizechaka Salt Lake in Tibet.

BYD Qinghai invested in the construction of a battery-grade lithium carbonate project and strategically invested in Shengxin Lithium Energy to promote the processing of lithium ore resources.

It is foreseeable that the entry of leading battery companies will help reduce the import dependence on overseas lithium concentrates and build diversified raw material supply channels, boost the industrialization of China’s lithium resources, and ease the tension in the supply of lithium salts in China.

Lithium salt price pullback

Different from the high enthusiasm for lithium resources, the price of lithium salt has been significantly loosened, and has gradually fallen and adjusted with shocks.

On May 19, the average price of battery-grade lithium carbonate in China was 461,500 RMB/ton, compared with the historical high of 502,500 RMB/ton in early April, with a price reduction of more than 40,000 RMB, or a drop of more than 8%.

The price correction of lithium salt is mainly due to the influence of policy supervision and the narrowing of the gap between supply and demand. With the release of new lithium salt production capacity at home and abroad, it is expected that the price of lithium carbonate is expected to fall to within 350,000 RMB/ton in 2022, and further fall in 2023.

In addition, the epidemic in China has had a certain impact on logistics, the external procurement of cathode material companies has decreased, and the wait-and-see mood has increased. Feedback upward to the cathode material side, the overall order volume was flat or slightly decreased, the demand for lithium salt spot market weakens, and the gap between supply and demand narrows.

The release of new production capacity has partially alleviated the tight supply and demand.

Internationally, the development of salt lake resources in South America entered the peak period last year, and the effective new production capacity of Albemarle, SQM, Orocobre and Ganfeng Lithium was gradually released.

At the same time, China’s salt lake + mica lithium extraction capacity will be released. On the one hand, the salt lake lithium extraction enterprises began to gradually increase the volume in March. It is expected that the output will increase significantly in June, and the output of lithium carbonate in Q2 will increase by 33.33% compared with that of Q1; With mining advantages, Jiangxi’s mica lithium extraction capacity is gradually released.

This wave of lithium carbonate prices has skyrocketed. On the one hand, due to the strong downstream market demand, the supply and demand mismatch has been caused. On the other hand, some lithium salt suppliers and intermediary traders are hoarding and reluctant to sell, and capital speculation has driven up prices to create panic in market demand, which has contributed to the rise in lithium carbonate prices.

Based on this, relevant departments have taken action to control, from the perspectives of market supervision and national policies, it has played a certain role in curbing the current hype of lithium carbonate prices, prompting the price of lithium carbonate to gradually fall.

On the whole, lithium resources are limited by the development cycle, and a large number of projects are expected to be put into production in 2023 and later.

In the long run, with the release of new production capacity in other countries, the acceleration of the industrialization of lithium resources in China, the release of superimposed production capacity, and the decline in cost, the price of lithium salt will eventually return to a reasonable level.

If you want to know about lithium material related companies, you can see Top 10 lithium cobalt oxide cathode material companies in China and Top 5 lithium iron phosphate cathode material companies in China, etc.