Lithium carbonate and lithium hydroxide are the main raw materials to manufacture the positive electrode of power battery, which is the core component to provide power for new energy vehicles. Goodenough, the winner of the Nobel Prize in Chemistry and the father of lithium battery, believes that lithium is a kind of “white oil” from the resource side. He once said: “Lithium is no less important than strategic resources such as oil. Once there is a bottleneck in mining, it may become the fuse of war like oil.”pass coin cell parts:20 As can be seen from its market performance, it has strong vitality and strong appeal. https://www.canrud.com/products/detail/81f89a31076f4fd18e883ee190d194cd
Although there is no sign of war, the battle around “lithium” is becoming increasingly fierce in the market.
In recent years, the rapid growth of the new energy vehicle market has caused the price of lithium to soar. At the beginning of 2021, lithium carbonate was still 53,000 yuan/ton, and by the end of 2022, it had risen to 560,000 yuan/ton, an increase of more than ten times, which made a lot of lithium industry giants earn a lot of money.
However, at the beginning of this year, the price of lithium carbonate began to fall all the way. At the end of April, it fell to 176,400 yuan/ton and then rebounded, but it gradually fell. According to Wind data, by December 20th, the price of domestic battery-grade lithium carbonate had dropped to 101,000 yuan/ton.
Price changes of lithium carbonate in recent year
Image source: Wind
Is it good news or bad news that the price of lithium carbonate has fallen? This question has different answers for enterprises in different links of the new energy industry chain, such as people drinking water, knowing whether they are warm or cold.
First, the price of lithium “diving”
The fluctuation of lithium price is determined by market supply and demand.
Lithium carbonate comes from lithium ore, which refers to minerals or rocks containing extractable lithium, and is mainly divided into hard rock type and salt lake type. Hard rock type lithium ores are mainly distributed in Australia, China, Canada and other countries, while salt lake type lithium ores are mainly distributed in Chile, Argentina, Bolivia and other countries in South America.
From 2016 to the end of 2017, the demand for new energy vehicles and electronic products broke out, which made lithium batteries in short supply and the price of lithium carbonate rose rapidly, which triggered a global lithium mine fever. The capital market rushed to invest and increased the development and reserve of lithium mines.
Price change of lithium carbonate since April 2017 (unit: RMB)
Image source: Wind
From the end of 2018 to the end of 2020, the COVID-19 epidemic swept the world, and the economic downturn greatly reduced the public’s willingness to consume, making the supply of lithium batteries exceed the demand. At the same time, the innovation and improvement of lithium battery technology have continuously improved the performance and efficiency of lithium batteries, which has also put pressure on the price of lithium carbonate to a certain extent. The imbalance between supply and demand and inventory backlog led to the decline in the price of lithium carbonate.
In 2021, the global economy gradually recovered, the demand for new energy vehicles and electronic products increased again, and the demand for lithium batteries increased, which led to a sharp rebound in lithium prices. Especially in 2022, it will continue to be at a high level of more than 450,000 RMB per ton.
However, behind the prosperity lies the crisis of collapse. After all, no matter how fast the demand grows, it is not as fast and stable as the mining industry. According to the Global Supply and Demand Report of Lithium-ion Battery Industry Chain in 2023 released by TrendForce, the global lithium production will reach about 860,000 tons of lithium carbonate equivalent (LCE) in 2022, and it is predicted that the global lithium production will reach 1.21 million tons in 2023, an increase of over 40%！this is obviously faster than the growth of market demand.
Overproduction leads to oversupply, and the price of lithium is “diving”, and the good days are over.
Second, eat the most “fat” meat and get the most “poisonous” beating.
From the buried mineral deposits to the batteries on the speeding electric vehicles, lithium runs through the industrial chain of lithium batteries in different forms. We simply divide this industrial chain into three links:
Upstream, it is a supplier of raw materials, realizing the transformation of lithium from lithium ore to lithium carbonate.
Midstream, a battery manufacturer, has realized the transformation of lithium from lithium carbonate to battery.
Downstream, it is the buyer of batteries, including new energy car companies.
Specifically, raw material suppliers located in the upstream of the industrial chain determine the supply of “lithium”. In China, the upstream enterprises include Tianqi Lithium Industry, Ganfeng Lithium Industry and Shengxin Lithium Energy. The year before, they made the most profits, and their output also made a “great leap forward”. Observer reported that the monthly output of battery-grade lithium carbonate in China reached 72,850 physical tons from January to November this year, up 53.79% year-on-year. However, when the price of lithium carbonate plummeted, they became the most seriously damaged enterprises. There are 27 companies whose A-shares are included in the concept of lithium mine. In the first three quarters, revenue decreased by 3.43% on average and net profit decreased by 63.47% on average. It can be seen that the output has increased, but the income has decreased, and the profit has plummeted by more than half.
What is more painful is that the current price of lithium has fallen below the production cost of some enterprises, that is to say, the more production, the more compensation.
Domestic raw materials of lithium carbonate mainly come from salt lakes in Tibet and Qinghai, spodumene in Sichuan, lepidolite in Jiangxi, and refined lithium ore mined from abroad, and the preparation cost increases in turn. According to industry experts’ estimation, the lowest cost of preparing lithium carbonate from salt lake can reach 30,000 yuan/ton, while the cost of preparing lithium carbonate from spodumene is about 70,000 yuan/ton.
21st century business herald once estimated that with the expansion of production, in 2022, the average cost of producing lithium carbonate by 12 domestic listed companies will increase to 124,400 yuan/ton. According to Late Finance, the cost of lithium carbonate for Yichun project in Jiangxi, Contemporary Amperex Technology Co., Limited is between 130,000 and 150,000 yuan per ton.
At present, the price of lithium is about to fall below 100,000 yuan/ton, that is to say, even enterprises with their own minerals can continue to produce without losing money, and only a few are left. DoNews sorted out the financial reports of some enterprises in the first three quarters, and their revenues and profits generally declined, with poor performance, especially the changes in profits were particularly bleak.
As the industry leader, the company’s revenue in the first three quarters was 25.68 billion yuan, down 6.99% year-on-year, and the net profit attributable to the mother was 6.01 billion yuan, down 59.38% year-on-year. Among them, in the third quarter, the company achieved revenue of 7.537 billion yuan, down 42.76% year-on-year, and net profit of 160 million yuan, down 97.88% year-on-year.
Tianqi Lithium’s revenue in the third quarter was 8.576 billion yuan, a year-on-year decrease of 17.14%, and its net profit returned to its mother was 1.646 billion yuan, a year-on-year decrease of 70.89%. Regarding the decline in profits, Tianqi Lithium said that the decline in the average selling price of lithium chemical products is the core reason for the decline in gross profit of lithium chemical products.
Considering that many new lithium salt projects are gradually entering the stage of capacity release, the situation of oversupply of lithium carbonate is likely to continue for some time, and the price of lithium carbonate will run at 100,000 yuan/ton or even lower. As an upstream enterprise of raw material suppliers, the days of suffering may be far away.