Battery metal demand price decline pattern or reverse? Lithium industry is expected to meet the performance inflection point ahead of time.

SMM: last week, driven by improved economic data from China and the United States, the price of basic metals fluctuated at a high level, the price of lithium salt rebounded, and the price of industrial-grade lithium carbonate rose 1.5% month-on-month, which is an important lithium material.

On the news side, the sales of electric cars in Europe continued to recover in August, domestic car companies and leading power battery enterprises continued to improve their production plans, the operating rate is expected to reach this year's peak, and the output of battery core materials increased significantly in August compared with the same period last year. Societe Generale's point of view is that the increment of market demand is mainly driven by "C-end", the demand structure is obviously optimized, and the peak season demand of the terminal market may rise in an all-round way.

Globally, lithium prices have fallen unilaterally for two years, with battery-grade lithium carbonate prices falling below 40,000 yuan per ton, said Li Chao, an analyst at Citic Securities. The current low lithium price has caused overall losses for Chinese lithium carbonate producers. Since 2020, Australian mining and Chinese companies have signed long orders to restart to further clarify the bottom signal of lithium prices, and lithium carbonate prices in China and South America have shown signs of rebound since July.

Citic believes that despite the impact of the epidemic, the accelerated rise of the overseas electric car market, the increase in the penetration of 5G mobile phones and the counter-trend growth in segments such as electric bicycles and TWS headphones have made lithium consumption in the battery sector highly resilient.

In terms of production capacity, affected by the epidemic and the downturn in lithium prices, global lithium resources expansion projects have been suspended and delayed on a large scale. From January to August 2020, the domestic output of ternary materials decreased by 16.2%. Citic believes that although the planned capacity of Chinese enterprises in the lithium salt sector is significantly excess, considering the construction and capacity climbing cycle of more than three years, the actual excess situation is not serious. The inflection point of industry balance may come ahead of time.

Citic Securities is optimistic that the rise in lithium prices in the second half of the year will significantly catalyze the performance of domestic lithium industry companies, and believes that the establishment of the industry inflection point will make enterprises move towards a positive cycle of both volume and price rise and inventory appreciation. It is suggested that the target should be selected around two main lines: 1) enterprises with clear lithium salt production growth, and 2) companies with upstream resource-side layout. Key recommendation: Ganfeng Lithium Industry, it is recommended to pay attention to Ya Hua Group and Tianhua Super Clean.