Lithium supply may continue to be lower than expected and lithium resources are expected to maintain a high economy for a long time [Agency Review]

Lithium: Europe's largest lithium mine project aborted, lithium supply side regeneration disturbance.

1) the three major lithium resource countries in South America are discussing the establishment of an organization of lithium producing countries, and the supply pattern may be further optimized. Argentina, Bolivia and Chile are discussing the establishment of an organization of lithium producing countries similar to the Organization of Petroleum Exporting countries, according to the Rio Times. According to USGS, Argentina, Bolivia and Chile accounted for about 60% of the world's lithium resources in 2020; Argentina and Chile accounted for 30% of the world's output. We believe that if the organization of lithium producing countries envisages a real landing: on the one hand, the concentration of lithium supply will be greatly increased, and the industry pattern is expected to be further optimized; on the other hand, under the guidance of the government, enterprise behavior will be more rational, and lithium prices will be more stable. In other words, the "lower limit" of lithium prices may rise significantly, the situation of skyrocketing and plummeting in the past is difficult to reappear, and the sustainability of high levels is expected to be enhanced.

2) Serbia has announced that it has vetoed the Jadar lithium project, which has a long way to go in the development of global lithium resources. This week, the Serbian government suspended Rio Tinto's Jadar lithium project for political and environmental reasons. Jadar is the largest greenfield lithium mine project in Europe. According to Rio Tinto, the lithium oxide capacity of the project is 2.48 million tons (6.12 million tons LCE,), which is close to the Australian mine Pilbara), 's planned annual production of 58000 tons of battery-grade lithium carbonate. At present, some views in the market believe that the development of lithium ore is easy, and with the construction of some green space projects one after another, the lithium industry may return to a state of surplus in a short period of time. The miscarriage of the Jadar lithium mine project precisely falsifies this point of view. In fact, the cycle of lithium mine development is usually about 3-5 years. Taking into account factors such as policy, environmental protection and process matching, the actual development time will be further lengthened. For example, mature mines such as Mt Cattlin and Mt Marion have experienced 7-8 years from the beginning of construction to stable production. Therefore, we believe that the increment that can be provided by new projects in the short and medium term may be very limited, and it will be difficult for the new lithium supply to match the annual demand growth of 10-250000 tons of LCE+ in the next few years, and the contradiction between supply and demand in the industry may exist for a long time, and we are optimistic about the long-term high prosperity of "white oil" lithium resources. Related targets: Rongjie shares, Koda Manufacturing, Shengxin Lithium Energy, Tianqi Lithium Industry, Ya Hua Group, Jiangte Motor, Ganfeng Lithium Industry, Yongxing Materials, Zang GE Holdings, Tianhua Super Clean, China Mineral Resources, Tibet Mining, Tibet City Investment, etc.

Risk hints: the risk of supply exceeding expectations, the risk of demand falling short of expectations, and the risk of policy change.