Lithium carbonate futures rose by more than 9% at one point! The impact of the Jiangxi environmental inspection event continues to ferment [SMM News]

SMM February 29th News: Following a sharp rise of 6% in the intraday trading on February 28th, lithium carbonate futures prices continued to show strength after the opening on February 29th, and accelerated in the afternoon, with the increase reaching 9.25% at one point. The main lithium carbonate contract once explored to 119,800 yuan/ton, reaching a new high of over 3 months since November 2023. As of the daytime closing, the main lithium carbonate contract reported a 9.21% increase to 119,200 yuan/ton. Multiple contracts such as 2409, 2412, 2411, 2410, 2501, 2502 rose by over 7%, and contract 2408 rose by 8.47%. Contracts 2405, 2407, 2406, 2403 rose by over 9%. In terms of spot prices, according to SMM spot quotations, battery-grade lithium carbonate spot prices have risen by 1,500 yuan/ton today, reporting 96,500 to 102,500 yuan/ton, with an average price of 99,500 yuan/ton, an increase of 3.48% compared to the low point of 96,150 yuan/ton on February 21. According to SMM research, due to the lockdown and reduced production of lithium salt plants in the vicinity of the Spring Festival, coupled with the expectation of a seasonal warming of the market in the second quarter, lithium salt companies have maintained high selling prices. However, with the continuous impact of the Jiangxi environmental inspection event, there is great uncertainty regarding future lithium salt supply, driving strong bullish sentiment in the lithium carbonate market. Most lithium salt companies have continued their previous strategy of maintaining high prices, boosting spot prices for lithium carbonate. In addition to the boost from the environmental news, the continuous adjustment of production and shutdown news from overseas mines also indicates a "bottoming out" message for the market. Although SMM expects that the disturbance from overseas mines will not have a significant impact on overall lithium salt supply in the medium to long term, undoubtedly, this type of news that affects sentiment has been particularly evident in the short term, providing momentum for the recent rise in lithium carbonate prices. In addition, on February 29th, according to the latest news from Cailianshe, SQM, a chemical mining company in Chile, stated that based on market conditions, lithium sales volumes are expected to increase by about 5-10% in 2024. The lithium market may grow by another 20% this year. It is expected that the market will remain oversupplied for the entire year, and prices will remain relatively stable. Depending on the timing of new supply and the extent of reduction in production by existing participants, prices may rise. As for the short-term trend of lithium prices, considering the apparent high prices for lithium salt companies selling spot orders, SMM expects that the subsequent spot transaction prices may continue to trend upward, but the overall space is relatively limited. Perhaps due to the significant rise in lithium carbonate futures, the energy and metal sector also strengthened today. As of the daytime closing, the energy metal index rose by 4.67%. Rongje shares rose by the limit during the trading session, but then failed to hold the limit, closing up 7.93%, Ganfeng Lithium rose by 7%, Tianqi Lithium, Tibet Mining, Shengxin Lithium Energy and other stocks followed suit. Institutional commentary: Guangzhou Futures stated that after the holiday, the operating rate of upstream lithium companies is low, and the impact of the Jiangxi environmental inspection event continues to ferment. The requirements for lithium residue absorption may become stricter, and the uncertainty of lithium salt supply may increase due to the previous reduction in Australian mine production and the downward adjustment of the sales volume of lithium concentrate. Short-term bullish sentiment is strong. On the demand side, the Fourth Meeting of the Central Finance and Economic Committee pointed out that it is necessary to promote the replacement of old production equipment and durable goods with new ones, and the battery production in March is expected to improve. After entering March, the variety may face pressure from warehouse receipt cancellations. It is necessary to pay attention to downstream replenishment demand, as well as the progress of the Jiangxi environmental inspection, and after the breakthrough of the high pressure in early December, attention should be paid to the lithium ore extraction cost line of around 130,000 yuan/ton in the fourth quarter of last year and the medium-term moving average pressure. Under the influence of news factors, the price in the next period may run on a trend that is relatively strong in the short term. Huatai Futures stated that overall, with supply disturbances and signs of improvement in consumption, lithium prices have some support, and short-term prices may run relatively strong, but warehouse receipts and total inventory pressure will exert a certain restraint on prices. In the long term, the overall supply pressure is still significant, and it is advisable to wait and release sentiment in the short term. If the rebound in the market gives good profits, producers can sell hedging opportunities in the market. For speculators, it is advisable to wait and engage in range operations in the short term, and to manage positions and control risks. The present main contract open interest is relatively large, and the subsequent reduction in positions may have a significant impact on the market, requiring attention to the risk of reduction in positions. CITIC Securities recently released a research report stating that Australian lithium mine production and sales volumes increased quarter-over-quarter in the fourth quarter of 2023, and the decline in the price of lithium concentrate widened. Overseas lithium mines have announced a reduction in production and sales volume guidance for 2024, and some high-cost lithium mines have suspended mining activities. We expect that there will still be a reduction in lithium mine production to cope with the rapidly falling lithium prices. The uncertainty of domestic lithium mine supply has increased in the near future, coupled with the recovery of demand for new energy vehicles, and lithium prices are expected to rebound.