[SMM Analysis] the strong demand situation has been maintained, and the iron and lithium will continue to rise after the Iron and Lithium Festival.

SMM2, March 10: recently, the price of lithium iron phosphate has been rising continuously. The average price of its power type has risen to 42500 / ton by February 9, and its daily high price has reached 45000 yuan. Compared with its average price of 38000 yuan / ton in early January, the upward range has reached 11.8%.

Generally speaking, the rapid upward price of lithium iron phosphate is mainly attributed to two aspects: on the one hand, the good demand downstream. In the second half of 2020, after the first half of the year, the new energy vehicle market was deserted, with the new energy subsidy policy and local stimulus, the license limit policy led to local demand, at the same time, industrial technology initially met the daily needs of consumers, and product diversity was strengthened. Its sales continued to warm up in the middle of last year. According to the data, the production and sales data of new energy vehicles reached 136.6 and 1.367 million respectively in 2020, both reaching record highs and boosting industry confidence. This trend is expected to continue in 2021. According to SMM, production of new energy vehicles will reach about 1.8 million in 2021, up 40 per cent from a year earlier. In addition, according to the installed capacity data, the proportion of lithium iron phosphate batteries installed in new energy vehicles has been increasing in the past few months. Compared with July 2020, the installed capacity of lithium iron phosphate batteries increased by 312.65% in December, far higher than 85% of ternary batteries, and the proportion of installed capacity reached 53.17% in that month. The reverse surpassing of ternary lithium batteries has been completed in the field of new energy vehicles. At the same time, the application of iron lithium in small power and energy storage is expected to continue in 2021.

Source: SMM

The strong performance of the downstream demand side has boosted market confidence, while the approach of the Spring Festival has led to the reserve demand of car companies, two-wheelers and energy storage equipment manufacturers, triggering bullish sentiment in the market.

On the other hand, the shortage of upstream raw materials, such as lithium carbonate and iron phosphate, also affects the price of lithium iron. Considering that the upstream lithium carbonate is still in the depot market, exports to China are expected to decrease due to repeated outbreaks in Chile, Argentina and other South American regions. At the same time, due to the influence of policies in some areas in winter, the supply of lithium carbonate in the upper reaches of the region falls short of demand.

Recently, with the Spring Festival approaching, although some iron and lithium manufacturers have temporarily suspended production due to equipment maintenance and other reasons, the overall output of the industry remains high. In February 2021, output is expected to reach 21350 tons, an increase of 413.2% over the same period last year, the highest in the past two years. Taking into account the continuation of the upstream supply to the warehouse, the reduction in the number of imports, while the downstream iron and lithium production remains high during the Spring Festival, it is generally difficult for iron and lithium manufacturers to purchase low-cost sources of goods, while downstream battery enterprises because of their strong demand, make iron and lithium manufacturers improve their bargaining power, helping to push the price of iron lithium up.

Generally speaking, the rigid demand for iron and lithium downstream is still there, orders remain high, and the demand for iron and lithium may gradually increase in the future in the areas of new energy vehicles, two-wheelers, and energy storage. in addition, with the recent Spring Festival approaching, logistics in some areas has been shut down, the overall market transaction is light, the transaction is less, and the downstream battery factory may bring a round of centralized purchase of iron and lithium after the festival, superimposing upstream supply. It is expected that the upward price of lithium iron phosphate will continue. It is expected that the mainstream price of lithium iron phosphate will rise to around 4.5-48000 by the end of February.