Lithium Carbonate Futures Record Two-Day Winning Streak, Breaking Through 80,000 Yuan/Mt Mark, Lithium Mine Sector Stock Prices Rise Across The Board, What Are The Drivers? [SMM Analysis]

SMM, November 14: On the morning of November 12, stock prices in the energy metals sector surged rapidly during trading, with the index soaring over 7% at one point, reaching a high of 573.91, the highest since August 2023. Among individual stocks, Tianhua New Energy hit the 20% limit up, Weiling Co. hit the limit up, and Sinomine Resource Group, Ganfeng Lithium, Tibet Mining, and Tianqi Lithium all rose over 5% during trading.

On the news front, CITIC Securities stated that the decline in lithium prices in Q3 2024 led to an expansion of production cuts by overseas lithium mines, with some mining companies selling assets to recoup funds. CITIC Securities believes that Australian lithium mines have started to incur cash losses, and further production cuts cannot be ruled out. Therefore, they have lowered the 2026 lithium industry supply surplus to 25,000 mt. In the short term, the fundamentals of the lithium industry have improved, and the current lithium prices have already been oversold. The lithium sector is expected to rebound.

In the past two trading days, lithium carbonate futures have also continued to rebound, once again standing above the 80,000 yuan/mt mark. As of the midday close on November 12, the most active lithium carbonate futures contract rose by 4.08%, closing at 81,700 yuan/mt.

Regarding the reasons for the sharp rise in lithium carbonate futures, SMM believes that both favourable macro front and improved fundamentals are indispensable. On the macro front, the incoming US President Trump focuses on the development of traditional energy, plans to lower or cancel fuel efficiency standards, and cancel the $7,500 EV tax credit, which will slow down the development of the EV market.

To cope with the impact of Trump's presidency on the new energy industry, domestic companies are "seizing the opportunity" to increase exports. Therefore, production conditions have improved towards the end of Q4 this year. In November, orders for power battery cells and energy storage battery cells were better than in October, and the production schedule for downstream cathode active materials is also expected to be better in November than in October.

According to SMM spot quotes, recent spot prices for battery-grade lithium carbonate have continued to rebound. As of November 12, the average price was 76,700 yuan/mt, up 3,400 yuan/mt from the low point on October 25, an increase of 4.64%.

Driven by demand, domestic lithium carbonate production is also on an upward trend, but the increase is limited. It is expected that the destocking pattern will continue in November. Recently, with the rise in downstream demand, lithium carbonate consumption has increased, and the market demand for spot order purchases of lithium carbonate has risen. The spot market transaction situation is optimistic. Upstream lithium chemical smelters have a strong sentiment to stand firm on quotes during the peak demand season, and the price center of lithium carbonate spot transactions has moved up.

In October, NEV retail sales hit a record high, and the auto market is entering the year-end sprint stage in November. According to CAAM data, NEV production and sales in October increased by 48% and 49.6% YoY, respectively, accounting for 46.8% of total new car sales, exceeding market expectations. Power battery installations increased by 8.6% MoM and 51% YoY. Moreover, the domestic retail penetration rate of NEVs has exceeded 50% for four consecutive months.

For November expectations, Cui Dongshu, Secretary General of the China Passenger Car Association, stated that the auto market is entering the year-end sprint stage, and domestic sales of new energy passenger cars are expected to increase by 39% YoY in Q4, with cumulative sales in 2024 up 38% YoY. The China Automobile Dealers Association expects that end-use sales in November will maintain a growth trend, and local trade-in policies will have a significant boosting effect on the market.